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

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  • Fujisaki, Seiya

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.

Suggested Citation

  • Fujisaki, Seiya, 2013. "Taylor rules and equilibrium determinacy in a two-country model with non-traded goods," Economic Modelling, Elsevier, vol. 35(C), pages 597-603.
  • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:597-603
    DOI: 10.1016/j.econmod.2013.08.018
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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