New study shows how monetary policy changes can impact economic stability
The paper explores how central banks can stabilize the economy by adjusting interest rates in response to inflation changes. They show that policy can follow this principle in the long run, even if there are deviations in the short or medium term. When the principle is not followed, economic volatility can increase due to how monetary policy reacts to shocks. Changing policy regimes can lead to different outcomes in economic models, offering new insights into real-world data.