01779cas a2200265 a 4500 AALejournalIMF009787 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451868807 1018-5941 BD-DhAAL BD-DhAAL Cihak, Martin. Taylor Rule Under Financial Instability / Martin Cihak, Ales Bulir, Sofia Bauducco. Washington, D.C. : International Monetary Fund, 2008. 1 online resource (41 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper contributes to the analysis of monetary policy in the face of financial instability. In particular, we extend the standard new Keynesian dynamic stochastic general equilibrium (DSGE) model with sticky prices to include a financial system. Our simulations suggest that if financial instability affects output and inflation with a lag and if the central bank has privileged information about credit risk, monetary policy that responds instantly to increased credit risk can trade off more output and inflation instability today for a faster return to the trend than a policy that follows the simple Taylor rule with only the contemporaneous output gap and inflation. Mode of access: Internet Bauducco, Sofia. Bulir, Ales. IMF Working Papers; Working Paper ; No. 2008/018 Full text available on IMF http://elibrary.imf.org/view/journals/001/2008/018/001.2008.issue-018-en.xml IMF e-Library