The AEA is providing open access to all journal content on the AEA website through August 2020 to overcome any difficulties some may have accessing library subscriptions during these challenging times.
The AEA is providing open access to all journal content on the AEA website through August 2020 to overcome any difficulties some may have accessing library subscriptions during these challenging times.
Violations of Tinbergen's rule and strategic interaction undermine stabilization policies in a New-Keynesian model with the
Bernanke-Gertler accelerator. Welfare costs of risk shocks are
large because of efficiency losses and income effects of costly monitoring, but they are much larger under a simple Taylor rule (STR)
or a Taylor rule augmented with credit spreads (ATR) than with a
Taylor rule and a separate financial rule targeting spreads. ATR
and STR are tight money-tight credit regimes responding too much
(little) to in
ation (spreads). The Nash equilibrium of monetary
and financial policies is also tight money-tight credit but it dominates ATR and STR.
