Monetary Policy without the Taylor Principle
We show that a vanishingly small friction in intertemporal co-ordination results in a unique bounded equilibrium in the New Keynesian model. This is the equilibrium customarily used to guide monetary policy, also known as the minimum-state-variable solution. But it does not rely on the Taylor Principle or any other off-equilibrium policy threat, and is therefore also immune to the Fiscal Theory of the Price Level. This liberates policy analysis from a thorny equilibrium selection issue.

Please sign up for meetings here: docs.google.com/spreadsheets/d/1oFAnK-yvsv3jPAmaKUUeVdv-mw-3sJpQQnmoC0qLRa8/edit#gid=0
Date: 4 May 2021, 13:00 (Tuesday, 2nd week, Trinity 2021)
Venue: Held on Zoom
Speaker: George-Marios Angeletos (Massachusetts Institute of Technology)
Organising department: Department of Economics
Part of: Macroeconomics Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark