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Endogenous Cycles, Debt and Monetary Policy

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Author Info
Piero Ferri ()
Anna Maria Variato ()
Abstract

The paper discusses the dynamic properties of a macro model with an investment function based upon both real and financial aspects and a labor market ruled by imperfect competition. The model is then enriched by a monetary policy rule and by agents who forecast according to a time series strategy based upon a Markov process. Simulations show the persistence of oscillations even in the presence of the Taylor rule. The relevance of such financial aspects as cash flows and debts can create a trade-off between the control of inflation and the cyclicality of the economy. Furthermore, instability and debt-deflation phenomena can arise.

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File URL: http://wwwdata.unibg.it/dati/bacheca/670/27873.pdf
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Publisher Info
Paper provided by University of Bergamo, Department of Economics in its series Working Papers with number 0703.

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Length: 22 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:brg:wpaper:0703

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Related research
Keywords: endogenous cycles; monetary policy; learning;

Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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