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Monetary Policy and Equilibrium Indeterminacy in a Cash-in-Advance Economy with Investment

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Listed:
  • Chong Kee Yip

    (Department of Economics, The Chinese University of Hong Kong)

  • Ka Fai Li

    (Department of Economics, The Chinese University of Hong Kong)

Abstract

In a cash-in-advance economy where cash is required in advance of purchasing both consumption and investment goods, we find that active interest rate rules generate equilibrium uniqueness, but passive rules can lead to real indeterminacy. Simulation shows that even in the presence of investment, passive rules are very likely to render indeterminacy.

Suggested Citation

  • Chong Kee Yip & Ka Fai Li, 2004. "Monetary Policy and Equilibrium Indeterminacy in a Cash-in-Advance Economy with Investment," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-03e50006
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    References listed on IDEAS

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    Cited by:

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    4. Seiya Fujisaki, 2008. "Equilibrium Determinacy of Endogenous Growth with Generalized Taylor Rule: A Discrete-Time Analysis," Discussion Papers in Economics and Business 08-21, Osaka University, Graduate School of Economics.
    5. Kazuo Mino & Seiya Fujisaki, 2007. "Generalized Taylor Rule and Determinacy of Growth Equilibrium," Economics Bulletin, AccessEcon, vol. 5(11), pages 1-7.

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    More about this item

    Keywords

    indeterminacy;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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