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Equilibrium Determinacy of Endogenous Growth with Generalized Taylor Rule: A Discrete-Time Analysis

  • Seiya Fujisaki


    (Graduate School of Economics, Osaka University)

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    This paper examines equilibrium determinacy of a discrete-time AK growth model with a generalized Taylor rule under which interest rate responds to the growth rate of real income as well as to the rate of inflation. We use the standard money-in-the-utility formulation in which money is superneutral on the balanced-growth path. We show that even in such a simple environment, the generalized Taylor rule may yield indeterminacy of equilibrium easily. We also demonstrate that equilibrium determinacy depends on the timing of money holding of households as well.

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    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-21.

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    Length: 28 pages
    Date of creation: Apr 2008
    Date of revision:
    Handle: RePEc:osk:wpaper:0821
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    1. Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 1999. "Monetary Policy and Multiple Equilibria," Departmental Working Papers 199914, Rutgers University, Department of Economics.
    2. repec:ebl:ecbull:v:5:y:2007:i:11:p:1-7 is not listed on IDEAS
    3. Suen, Ming-Hon & Yip, Chong K., 2005. "Superneutrality, indeterminacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 27(4), pages 579-595, December.
    4. Leeper, Eric M., 1991. "Equilibria under 'active' and 'passive' monetary and fiscal policies," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 129-147, February.
    5. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    6. Chen, Shu-Hua & Guo, Jang-Ting, 2008. "Velocity of money, equilibrium (in)determinacy and endogenous growth," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 1085-1096, September.
    7. repec:chk:cuhked:_136 is not listed on IDEAS
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