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We introduce rule-of-thumb consumers in an otherwise standard dynamic sticky price model, and show how their presence can change dramatically the properties of widely used interest rate rules. In particular, the existence of a unique equilibrium is no longer guaranteed by an interest rate rule that satisfies the so called Taylor principle. Our findings call for caution when using estimates of interest rate rules in order to assess the merits of monetary policy in specific historical periods.

Se revisan los resultados principales y la literatura de la teoría fiscal de los precios, analizando los efectos de los stocks monetarios y fiscales bajo un régimen fiscal.

This paper is an attempt to provide an updated assessment of what know and what do not know about the impact of monetary policy on the economy and what implications follow for the conduct of monetary policy in today's world. Firstly, we discuss the conditions under which monetary policy can be expected to affect the economy, both over the medium term and the short term, and review the most policy-relevant empirical results, providing some new evidence. Secondly, we analyze the implications that the empirical regularities have for the practical conduct of monetary policy. We focus on wether the existence of short-run real effects can and should bo exploited by central banks and whether the impact of monetary policy on the economy may be affected by the present circumstances of low rates of inflation and low nominal interest rates.