| Author: | Marini, G. |
| Title: | Monetary shocks and the nominal interest rate. |
| Journal: | Economica
1992 : AUG, VOL. 59:235, p. 365-371 |
| Index terms: | MONETARY POLICY INTEREST RATES ECONOMETRIC MODELS |
| Language: | eng |
| Abstract: | The response of nominal interest rates to monetary shocks seems to be a theoretical puzzle. The paper offers an explanation based on a standard rational expectations macroeconomic model where changes in policy regimes are explicitly modelled. When the monetary authorities are unconcerned with output stabilization, random monetary shocks boost output and money demand in such a way that increases in the nominal interest rates are necessary to bring about equilibrium. When the policy objective is minimizing the output effects of nominal shocks, excess supply of money occurs and a nominal interest rate fall is required to restore equilibrium. |
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