misspecification bias

Deriving the Taylor Principle when the Central Bank Supplies Money

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Version Date: 
Jul 2012

The paper presents a human-capital-based endogenous growth, cash-in-advance economy with endogenous velocity where exchange credit is produced in a decentralized banking sector, and money is supplied stochastically by the central bank. From this it derives an exact functional form for a general equilibrium `Taylor rule'.

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