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Technological change and monetary policy in a sticky-price model

  • Tsuzuki, Eiji
  • Inoue, Tomohiro
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    We developed a sticky-price model that introduces the factors of (a) the non-separability of consumption and labor in the utility function and (b) a technological change induced by the investment of profits, to analyze the determinacy of equilibrium. We found that while engaging in inflation targeting increases the probability of determinacy, engaging in share-price targeting decreases the probability of determinacy in a standard sticky-price model; engaging in both inflation targeting and share-price targeting can increase the probability of determinacy in our model.

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    Article provided by Elsevier in its journal Research in Economics.

    Volume (Year): 65 (2011)
    Issue (Month): 3 (September)
    Pages: 180-194

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    Handle: RePEc:eee:reecon:v:65:y:2011:i:3:p:180-194
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    1. Sbordone, Argia, 1998. "Prices and Unit Labor Costs: A New Test of Price Stickiness," Seminar Papers 653, Stockholm University, Institute for International Economic Studies.
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    8. Takushi Kurozumi, 2006. "Determinacy and Expectational Stability of Equilibrium in a Monetary Sticky-Price Model with Taylor Rule," Bank of Japan Working Paper Series 06-E-2, Bank of Japan.
    9. Ben S. Bernanke & Michael Woodford, 1997. "Inflation Forecasts and Monetary Policy," NBER Working Papers 6157, National Bureau of Economic Research, Inc.
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    11. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," NBER Working Papers 6442, National Bureau of Economic Research, Inc.
    12. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    13. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
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