Determinacy without the Taylor Principle

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


Our understanding of monetary policy is complicated by an indeterminacy problem: the same path for the nominal interest rate is consistent with multiple equilibrium paths for inflation and output. We offer a potential resolution by showing that small frictions in social memory and intertemporal coordination can remove this indeterminacy. Under our perturbations, the unique equilibrium is the same as that selected by the Taylor principle, but it no more relies on it; monetary policy is left to play only a stabilization role; and fiscal policy needs to be Ricardian even when monetary policy is passive.

Original languageEnglish (US)
Pages (from-to)2125-2164
Number of pages40
JournalJournal of Political Economy
Issue number8
StatePublished - Aug 2023

ASJC Scopus subject areas

  • Economics and Econometrics


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