Pitfalls of Coordination?
by Sergey Slobodyan
National Research University Higher School of Economics, CERGE-EI, and Financial Research Institute of the Ministry of Finance of Russia
I argue that the rather unfavorable conclusions of the three
papers in the session on “Coordination and Tradeoffs” might
not be as bad as they seem. In particular, I dwell on challenges
facing the central bank using an interest rate that is different
from the risk-free rate in its Taylor rule, and show that proper
redefinition of the intercept and the slope of the rule allows
avoidance of inflationary bias and preserves the stability of
JEL Code: E43, E52, E58, E63.
Full article (PDF, 10 pages, 237 kb)