Equilibrium Determinacy of Endogenous Growth with Generalized Taylor Rule: A Discrete-Time Analysis
AbstractThis paper examines equilibrium determinacy of a discrete-time AK growth model with a generalized Taylor rule under which interest rate responds to the growth rate of real income as well as to the rate of inflation. We use the standard money-in-the-utility formulation in which money is superneutral on the balanced-growth path. We show that even in such a simple environment, the generalized Taylor rule may yield indeterminacy of equilibrium easily. We also demonstrate that equilibrium determinacy depends on the timing of money holding of households as well.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-21.
Length: 28 pages
Date of creation: Apr 2008
Date of revision:
equilibrium determinacy; the Taylor rules; endogenous growth; timing of money holdings;
Find related papers by JEL classification:
- O42 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-10 (All new papers)
- NEP-CBA-2008-05-10 (Central Banking)
- NEP-DGE-2008-05-10 (Dynamic General Equilibrium)
- NEP-MAC-2008-05-10 (Macroeconomics)
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