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Taylor rules and equilibrium determinacy in a two-country model with non-traded goods

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  • Fujisaki, Seiya
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    Abstract

    We analyze a relation between interest rate controls and equilibrium determinacy using a two-country model featuring traded and non-traded goods. In addition, parameters of preference and production may differ between the two countries. We find that macroeconomic stability strongly depends on such heterogeneity including monetary policy, and that it is easier to generate determinate equilibrium under perfect liberalization of the economy, but to operate monetary policy in the economy with non-traded goods.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0264999313003349
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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 35 (2013)
    Issue (Month): C ()
    Pages: 597-603

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    Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:597-603

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Heterogeneity; Taylor rule; Open economy; Non-traded goods; Equilibrium determinacy;

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