The design of interest rate rules for conducting monetary policy have recently been examined for two key concerns. The first issue is determinacy of equilibria. Indeterminacy (multiplicity of stationary rational expectations equilibria) is a concern in models of monopolistic competition and price stickiness are currently a popular framework for the study of monetary policy. The second issue is stability of equilibria under adaptive learning. Some interest rate rules do not perform well when the expectations of the agents get out of equilibrium, e.g. as a result of structural shifts.
The discussant comments were presented at the Monetary Policy and Learning Conference sponsored by the Federal Reserve Bank of Atlanta in March 2003. The views expressed here are the author’s and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the author’s responsibility.
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