Macroeconomic Stabilization When the Natural Real Interest Rate Is Falling

Autor/inn/en	Buttet, Sebastien; Roy, Udayan
Titel	Macroeconomic Stabilization When the Natural Real Interest Rate Is Falling
Quelle	In: Journal of Economic Education, 46 (2015) 4, S.376-393 (18 Seiten)Infoseite zur Zeitschrift PDF als Volltext Verfügbarkeit
Sprache	englisch
Dokumenttyp	gedruckt; online; Zeitschriftenaufsatz
ISSN	0022-0485
DOI	10.1080/00220485.2015.1071218
Schlagwörter	Macroeconomics; Credit (Finance); Models; Economic Climate; Banking; Economics Education + Suchen Sie Ihr Suchwort? Makroökonomie; Credit; Kredit; Analogiemodell; Wirtschaftslage; Bankgeschäft; Wirtschaftskunde
Abstract	The authors modify the Dynamic Aggregate Demand-Dynamic Aggregate Supply model in Mankiw's widely used intermediate macroeconomics textbook to discuss monetary policy when the natural real interest rate is falling over time. Their results highlight a new role for the central bank's inflation target as a tool of macroeconomic stabilization. They show that even when the zero lower bound is "not" binding, a prudent central bank must match every decrease in the natural real interest rate with an equal increase in the target rate of inflation in order to stabilize the risk of the economy falling into a deflationary spiral, which is an acute case of simultaneously falling output and inflation in which the economy's self-correcting forces are inactive. (As Provided).
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Erfasst von	ERIC (Education Resources Information Center), Washington, DC
Update	2020/1/01