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Interest-rate rule and multiple equilibria with endogenous growth

Author

Listed:
  • Kazuo Mino

    (Graduate School of Economics, Kobe University)

  • Jun-ichi Itaya

    (Graduate School of Economics)

Abstract

This paper examines the role of interest-rate feedback rule in a monetary endogenous growth model in which money is introduced via a cash-in-advance constraint and long-run growth is sustained by external increasing returns. It is shown that dynamic properties as well as the balanced-growth characterization are highly sensitive not only to the degree of increasing returns but also to the interest-rate feedback rule adopted by the monetary authority. In particular, the conditions for indeterminacy of equilibrium depends heavily upon whether the interest-rate rule is active or passive.

Suggested Citation

  • Kazuo Mino & Jun-ichi Itaya, 2004. "Interest-rate rule and multiple equilibria with endogenous growth," Economics Bulletin, AccessEcon, vol. 5(6), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-04e50001
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    References listed on IDEAS

    as
    1. Itaya, Jun-Ichi & Mino, Kazuo, 2007. "Technology, Preference Structure, And The Growth Effect Of Money Supply," Macroeconomic Dynamics, Cambridge University Press, vol. 11(5), pages 589-612, November.
    2. Benhabib, Jess & Schmitt-Grohe, Stephanie & Uribe, Martin, 2001. "The Perils of Taylor Rules," Journal of Economic Theory, Elsevier, vol. 96(1-2), pages 40-69, January.
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    7. Shi-ichi Fukuda, 1996. "Money and Economic Growth Increasing Returns- to Scale," Discussion Paper Series a320, Institute of Economic Research, Hitotsubashi University.
    8. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
    9. Jun-Ichi Itaya & Kazuo Mino, 2003. "Inflation, Transaction Costs and Indeterminacy in Monetary Economies with Endogenous Growth," Economica, London School of Economics and Political Science, vol. 70(279), pages 451-470, August.
    10. Dupor, Bill, 2001. "Investment and Interest Rate Policy," Journal of Economic Theory, Elsevier, vol. 98(1), pages 85-113, May.
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    Cited by:

    1. repec:ebl:ecbull:v:5:y:2007:i:11:p:1-7 is not listed on IDEAS
    2. 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.
    3. Chin, Chi-Ting & Guo, Jang-Ting & Lai, Ching-Chong, 2009. "Macroeconomic (in)stability under real interest rate targeting," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1631-1638, September.
    4. Yoshiyasu Ono, 2008. "Determinacy of Equilibrium under Various Phillips Curves," ISER Discussion Paper 0706, Institute of Social and Economic Research, Osaka University.
    5. Itaya, Jun-Ichi & Mino, Kazuo, 2007. "Technology, Preference Structure, And The Growth Effect Of Money Supply," Macroeconomic Dynamics, Cambridge University Press, vol. 11(5), pages 589-612, November.
    6. 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

    endogenous growth;

    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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