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Technological change and monetary policy in a sticky-price model

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  • Tsuzuki, Eiji
  • Inoue, Tomohiro
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    Abstract

    We developed a sticky-price model that introduces the factors of (a) the non-separability of consumption and labor in the utility function and (b) a technological change induced by the investment of profits, to analyze the determinacy of equilibrium. We found that while engaging in inflation targeting increases the probability of determinacy, engaging in share-price targeting decreases the probability of determinacy in a standard sticky-price model; engaging in both inflation targeting and share-price targeting can increase the probability of determinacy in our model.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1090944310000529
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    Bibliographic Info

    Article provided by Elsevier in its journal Research in Economics.

    Volume (Year): 65 (2011)
    Issue (Month): 3 (September)
    Pages: 180-194

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    Handle: RePEc:eee:reecon:v:65:y:2011:i:3:p:180-194

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    Web page: http://www.elsevier.com/locate/inca/622941

    Related research

    Keywords: Taylor principle Indeterminacy Share-price targeting New Keynesian Phillips curve;

    References

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    9. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
    10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    12. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-84, November.
    13. Carlstrom, Charles T. & Fuerst, Timothy S., 2001. "Timing and real indeterminacy in monetary models," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 285-298, April.
    14. Kurozumi, Takushi, 2006. "Determinacy and expectational stability of equilibrium in a monetary sticky-price model with Taylor rule," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 827-846, May.
    15. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
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