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I demonstrate that econometric estimations of nominal interest rate rules may tell little, if anything, about an economy's determinacy properties. In particular, correct inference about the interest-rate response to inflation provides no information about determinacy. Instead, it could reveal whether optimal monetary policymaking is performed under discretion or commitment.
Keywords: monetary policy; interest rate rules; Taylor rules; equilibrium determinacy; discretion versus rules
Published Online: 2011-5-5
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston