Premium
MONETARY POLICY WITH INVESTMENT–SAVING IMBALANCES
Author(s) -
Tamborini Roberto
Publication year - 2010
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.2009.04078.x
Subject(s) - economics , monetary policy , context (archaeology) , investment (military) , monetary economics , macroeconomics , politics , political science , law , biology , paleontology
Financial instability is the new challenge for monetary policy. Most studies indicate that financial crises follow prolonged unwinding of investment–saving imbalances (ISI). These phenomena are not contemplated by the standard theoretical framework of continuous intertemporal equilibrium. This paper's aim is to take a first step into the analysis of monetary policy in the context of ISI. First, a dynamic model of a flex‐price, competitive economy is presented where ISI are allowed to develop. Second, upon introducing different types of Taylor rules, some indications for the conduct of monetary policy emerge, which are at variance with the standard view.