Monetary Policy, Multiple Equilibria And Hysteresis Effects On The Labor Market
In this paper we demonstrate that a standard loss function of a central bank may generate multiple equilibria which can contribute to hysteresis effects on the labor market. Multiple equilibria are feasible if the objective function of the central bank is non-quadratic. Such preferences may arise if the weights for output and inflation stabilization are state dependent, for example, if output stabilization is more important for low levels of actual output compared to higher levels (or inflation stabilization is more important for high inflation rates than for low rates). As further shown (in the appendix of the paper) non-quadratic central bank preferences may also be due to other reasons. We show how both the Hamiltonian function as well as the Bellman equation can be used to solve the monetary control problem with multiple equilibria.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||05 Jul 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +34 93 542 17 46
Web page: http://enginy.upf.es/SCE/Email:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:sce:scecf0:196. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.