期刊名称：Departmental Discussion Papers / University of Glasgow, Department of Economics
出版年度：2002
卷号：1
出版社：University of Glasgow, Department of Economics
摘要：Taylor rules which link short-term interest rates to fluctuations in inflation and output, have
been shown to be a good guide (both positively and normatively) to the conduct of monetary policy. As
a result they have been used extensively to model policy in the context of both closed and open
economy models. A key question that arises when analysing the conduct of such policy rules in the
open economy case is whether the relevant measure of inflation is the growth in output prices or
consumer prices. In this paper, we show that embedding a rule specified in terms of output price
inflation into a benchmark two-country model confirms the existing result that local stability requires
that the response of nominal interest rates to excess inflation should be such that real interest rates rise
(the Taylor Principle), but this requirement may be partially offset by raising the interest rate response
to increases in the output gap. However, all the conventional results do not hold when we replace
output price inflation with consumer price inflation. In this case, Taylor rules which satisfy the Taylor
principle will not support a unique rational expectations path for prices and other macroeconomic
variables in response to specific shocks. Our results suggest that adoption of consumer price based
Taylor rules might be chronically destabilising
