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Optimal monetary policy in a New Keynesian model with endogenous growth

  • Annicchiarico, Barbara
  • Rossi, Lorenza

We study optimal monetary policy in a New Keynesian (NK) model with endogenous growth and knowledge spillovers external to each firm. We find that, in contrast with the standard NK model, the Ramsey dynamics implies deviation from full inflation targeting in response to technology and government spending shocks, while the optimal operational rule is backward looking and responds to inflation and output deviations from their long-run levels.

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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 38 (2013)
Issue (Month): PB ()
Pages: 274-285

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Handle: RePEc:eee:jmacro:v:38:y:2013:i:pb:p:274-285
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