ASCARI, GUIDO; ROPELE, TIZIANO - In: Journal of Money, Credit and Banking 41 (2009) 8, pp. 1557-1584
Positive trend inflation shrinks the determinacy region of a basic New Keynesian dynamic stochastic general equilibrium model when monetary policy is conducted by a contemporaneous interest rate rule. Neither the Taylor principle, which requires the inflation coefficient to be greater than one,...