Inflation targets and expectational consistency in a model with a non-linear interest rule

Carlos Eduardo Iwai Drumond, Cleiton Silva de Jesus, João Basilio Pereima

Abstract


The aim of this paper is to develop a post-Keynesian macroeconomic model that takes into account a non-linearity in the interest rate rule. We assume that the monetary authority considers, in the practice of monetary policy, an interaction between inflation rates and the rate of capacity utilization, so that the sensitivity of the interest rate rule to the gap of inflation in relation to target varies according to the economic cycle. The macroeconomic policy framework proposed here allows the monetary authority to be sensitive to the inflation and to the output without, losing sight of the anchoring role of the inflation target.


Keywords


post-Keynesian dynamics; non-linear interest-rate-rule; expectational consistency

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DOI: http://dx.doi.org/10.33834/bkr.v4i2.120

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Copyright (c) 2019 Carlos Eduardo Iwai Drumond, Cleiton Silva De Jesus, Cleiton Silva De Jesus, João Basilio Pereima, João Basilio Pereima

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This work is licensed under a Creative Commons Attribution 4.0 International License.

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.