Open Mouth Operations

Jeffrey Campbell and Jacob Weber ()

No WP-2018-3, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: We examine the standard New Keynesian economy?s Ramsey problem written in terms of instrument settings instead of allocations. Its standard formulation makes two instruments available: the path of current and future interest rates, and an ?open mouth operation? which selects one of the many equilibria consistent with the chosen interest rates. Removing the open mouth operation by imposing a finite commitment horizon yields pathological policy advice that relies on the model's forward guidance puzzle.

Keywords: Keynesian economics; equilibrium multiplicity; monetary policy; open market operations (search for similar items in EconPapers)
JEL-codes: E12 E52 E58 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2018-02-05
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.chicagofed.org/~/media/publications/wo ... 18/wp2018-03-pdf.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:wp-2018-03

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Lauren Wiese ().