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Money Growth Rules and Price Level Determinacy

The authors show that in a plausibly calibrated monetary model with explicit production, exogenous money growth rules ensure real determinacy and thus avoid sunspot fluctuations. Although it is theoretically possible to construct examples in which real indeterminacy does arise, these examples rely on implausible money-demand elasticities or ignore the effect of production on the model’s dynamics.

Suggested citation: Carlstrom, Charles T., and Timothy S. Fuerst, 2000. “Money Growth Rules and Price Level Determinacy,” Federal Reserve Bank of Cleveland, Working Paper, no. 00-10.

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