June 2018 issue contents
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 equilibrium.

JEL Code: E43, E52, E58, E63.

Full article (PDF, 10 pages, 237 kb)