Department of Economics and Business - Universitat Pompeu Fabra

Title:: Constant interest rate projections without the curse of indeterminacy
Author:: Jordi Galí
Date:: August 2007 (Revised: February 2008)
Abstract:: Constant interest rate (CIR) projections are often criticized on the grounds that they are inconsistent with the existence of a unique equilibrium in a variety of forward-looking models. This note shows how to construct CIR projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework.
Keywords:: Interest rate peg, in.ation targeting, conditional forecasts, interest rate rules, multiple equilibria
JEL codes:: E37, E58
Area of Research:: Macroeconomics and International Economics

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