Author(s)

John Smithin¹, Eric Kam²

¹Aurora Philosophy Institute & York University, Toronto, Canada.
²Department of Economics, Toronto Metropolitan University, Toronto, Canada.

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.

Inflation instability, Nominal policy rate of interest, Real policy rate of interest, ZRPR, ZIRP

Smithin, J. and Kam, E. (2024) Stability and Instability in the “Alternative Monetary Model” (AMM). Theoretical Economics Letters, 14, 211-218. doi: 10.4236/tel.2024.141012.