Dynamic monetary control and interest rate stabilization

摘要: Abstract Interest rate stabilization results in an instrument shortage that complicates monetary control by introducing strategic considerations into the Trading Desk's decision problem. The paper demonstrates that, when expected future open market operations influence current bank and depositor behavior, is necessary sufficient for Commitment policy to be time-inconsistent Discretionary suboptimal, i.e., worse than policy. moving average component of higher order Under either regime, value representative increasing emphasis on interest stability.