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Endogenous Cycles, Debt and Monetary Policy

Author

Listed:
  • Piero Ferri

    ()

  • Anna Maria Variato

    ()

Abstract

The paper discusses the dynamic properties of a macro model with an investment function based upon both real and financial aspects and a labor market ruled by imperfect competition. The model is then enriched by a monetary policy rule and by agents who forecast according to a time series strategy based upon a Markov process. Simulations show the persistence of oscillations even in the presence of the Taylor rule. The relevance of such financial aspects as cash flows and debts can create a trade-off between the control of inflation and the cyclicality of the economy. Furthermore, instability and debt-deflation phenomena can arise.

Suggested Citation

  • Piero Ferri & Anna Maria Variato, 2007. "Endogenous Cycles, Debt and Monetary Policy," Working Papers (-2012) 0703, University of Bergamo, Department of Economics.
  • Handle: RePEc:brg:wpaper:0703
    as

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    File URL: http://aisberg.unibg.it/bitstream/10446/283/1/WPEco03(2007)Ferri.pdf
    File Function: Version, 07-2007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    endogenous cycles; monetary policy; learning;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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