TITLE:
Stability and Instability in the “Alternative Monetary Model” (AMM)
AUTHORS:
John Smithin, Eric Kam
KEYWORDS:
Inflation instability, Nominal policy rate of interest, Real policy rate of interest, ZRPR, ZIRP
JOURNAL NAME:
Theoretical Economics Letters,
Vol.14 No.1,
February
29,
2024
ABSTRACT: This note clarifies some of the stability issues that arise in the
consideration of alternative interest rate rules for monetary policy. The main
finding is that a nominal interest rate peg leads to instability in the
inflation rate (which can go in either direction) and general economic
instability, whereas a real interest rate rule is
conducive to stability.