We study monetary policy in a reduced-form dynamic model with bounded rationality and an empirically motivated investment function. Investment has important dynamic effects in our model. In particular, the cost of capital effect on investment is more important for monetary transmission than the...

We consider a model of inflation and unemployment proposed in Ferri et al. (JEBO, 2001), in which the dynamics are described by a discontinuous piecewise linear map, made up of two branches. We shall show that the bounded dynamics may be classified in two cases: we may have either regular...