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Stability and Instability in the “Alternative Monetary Model” (AMM)
Aurora Philosophy Institute & York University, Toronto, Canada
Department of Economics, Toronto Metropolitan University, Toronto, Canada
- 1 Aurora Philosophy Institute & York University, Toronto, Canada
- 2 Department of Economics, Toronto Metropolitan University, Toronto, Canada
Theoretical Economics Letters·Volume 14 (2024)·Pages 211–218·Published 18 January 2024·DOI10.4236/tel.2024.141012
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Abstract
This note clarifies some of the stability issues that arise in the consideration of alternative interest rate rules for monetary policy. The main finding is that a nominal interest rate peg leads to instability in the inflation rate (which can go in either direction) and general economic instability, whereas a real interest rate rule is conducive to stability .
KeywordsInflation instabilityNominal policy rate of interestReal policy rate of interestZRPRZIRP
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