On the optimality of interest rate smoothing

Article Abstract:

The optimality of interest rate smoothing is examined in some continuous-time cash-in-advance deterministic and stochastic models. In addition, the scope for monetary rule to improve welfare in an economic setting with a suboptimal real competitive equilibrium is analyzed. Results show that a monetary policy that keeps the nominal interest rate constant results in the monetary competitive equilibrium exhibiting the same relative prices of consumption as the real competitive equilibrium over time and across different states of nature.

Public Finance Activities, Fiscal Policy, Interest rates, Monetary policy

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Aggregation and irrelevance in multi-sector models

Article Abstract:

Input-output relationships generate fluctuations in aggregate output in a multisector business environment. This is evident in a study of several multisector models in which the manufacture of each sector's output is dependent on other sectors for materials. These relationships explain the mechanism of transmission of shocks over time and across sectors. A broad class of input-output structures is shown to produce aggregates with similar second moment properties and provide a poor amplification mechanism for sector shocks.

Economics, Research and Development in the Social Sciences and Humanities, Business cycles, Industrial productivity, Macroeconomics

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