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dc.contributor.authorAlstadheim, Ragna
dc.contributor.authorRøisland, Øistein
dc.description.abstractMonetary policy makers often seem to have preferences for a stable interest rate, in addition to stable inflation and output. In this paper we investigate the implications of having an interest rate level term in the loss function when the policymaker lacks commitment technology. We show that preferences for interest rate stability may lead to equilibrium indeterminacy. But even when determinacy is achieved, such preferences can become self-defeating, in the meaning of generating a less stable interest rate than in the case without preferences for interest rate stability. Aiming to stabilize the real interest rate instead of the nominal rate is more robust, as it always gives determinacy and also tends to give a more stable nominal interest rate than when the policymaker aims to stabilize the nominal rate.nb_NO
dc.publisherNorges Banknb_NO
dc.relation.ispartofseriesWorking Papers;8/2016
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 Internasjonal*
dc.subjectJEL: E52nb_NO
dc.subjectJEL: E58nb_NO
dc.subjectmonetary policynb_NO
dc.subjectinterest rate stabilitynb_NO
dc.titleWhen Preferences for a Stable Interest Rate Become Self-Defeatingnb_NO
dc.typeWorking papernb_NO
dc.subject.nsiVDP::Samfunnsvitenskap: 200::Økonomi: 210::Samfunnsøkonomi: 212nb_NO

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Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal
Except where otherwise noted, this item's license is described as Attribution-NonCommercial-NoDerivatives 4.0 Internasjonal