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Inflation, Nominal Interest Rates, and the Variability of Output

This paper examines the distribution of output around capacity when money demand is a nonlinear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of output is...

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Bibliographic Details
Main Author: Chadha, Bankim
Other Authors: Tsiddon, Daniel
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1996
Series:IMF Working Papers
Subjects:
Interest Rates
Inflation
Finance
Monetary Economics
Financial Services
Real Interest Rates
Deflation
Monetary Policy, Central Banking, And The Supply Of Money And Credit: General
Production
Money
Money Supply
Macroeconomics: Production
Industrial Capacity
Price Level
Monetary Base
Capacity Utilization
Demand For Money
Banks And Banking
Prices
Macroeconomics
Interest Rates: Determination, Term Structure, And Effects
Money And Monetary Policy
Production And Operations Management
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper examines the distribution of output around capacity when money demand is a nonlinear function of the nominal interest rate such that nominal interest rates cannot become negative. When fluctuations in output result primarily from disturbances to the money market, the variance of output is shown to be an increasing function of the trend inflation rate. When they result from disturbances to the goods market, the variance of output is a decreasing function of the trend inflation rate. When both disturbances are significant, there exists, in general, a critical non-zero trend inflation rate that minimizes the variance of output
Physical Description:36 pages
ISBN:9781451853162

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