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Transitional Dynamics in Monetary Economies: Numerical Solutions

In: Economic Growth

Author

Listed:
  • Alfonso Novales

    (Complutense University of Madrid)

  • Esther Fernández

    (Complutense University of Madrid)

  • Jesús Ruiz

    (Complutense University of Madrid)

Abstract

In Chap. 8 we characterized dynamic optimality conditions for monetary economies, but we only evaluated the steady-state effects of monetary policy. This chapter completes the analysis by characterizing the transitional dynamics of a monetary economy, as it moves from its initial condition to the steady-state, following a monetary policy intervention. We analyze the potential instability of public debt, an issue that restricts the set of feasible policies. We study both neoclassical and new Keynesian monetarist models, of the kind that are increasingly used at central banks around the world. We describe their theoretical foundations and characterize analytically the equilibrium conditions. After that, we present in detail the methodology to obtain numerical solutions to these models, which allows for the analysis of effects of different policy interventions.

Suggested Citation

  • Alfonso Novales & Esther Fernández & Jesús Ruiz, 2022. "Transitional Dynamics in Monetary Economies: Numerical Solutions," Springer Texts in Business and Economics, in: Economic Growth, edition 3, chapter 9, pages 461-538, Springer.
    • Handle: RePEc:spr:sptchp:978-3-662-63982-5_9
    DOI: 10.1007/978-3-662-63982-5_9
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