In this paper we consider a New Keynesian model for optimal monetary policy in a staggered fashion. We provide the relations of a non linear model of general economic equilibrium, implementing a suitable Taylortype interest rate rule. We characterize the conditions that guarantee local determinacy and explore conditions under which local bifurcations of the target equilibrium may occur. Afterwards, we argue how local determinacy might be associated with global indeterminacy, providing some numerical examples.
Cornaro, A., Agliari, A., Global and local determinacy in a one-step forward looking Newkeynesian model, <<ECONOMIC MODELLING>>, 2011; Volume 28, Issue 3 (Maggio): 1354-1362.. [doi:10.1016/j.econmod.2011.02.025] [http://hdl.handle.net/10807/3416]
Global and local determinacy in a one-step forward looking Newkeynesian model
Cornaro, Alessandra;Agliari, Anna
2011
Abstract
In this paper we consider a New Keynesian model for optimal monetary policy in a staggered fashion. We provide the relations of a non linear model of general economic equilibrium, implementing a suitable Taylortype interest rate rule. We characterize the conditions that guarantee local determinacy and explore conditions under which local bifurcations of the target equilibrium may occur. Afterwards, we argue how local determinacy might be associated with global indeterminacy, providing some numerical examples.
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