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The indeterminacy of a flexible exchange rate system when financial markets are dormant
McPherson, Sandra; Suliman, Osman; Sweidan, Osama - In: Competitiveness Review: An International Business Journal 22 (2012) 1, pp. 8-17
Purpose – The purpose of this paper is to examine the extent to which a flexible exchange rate system is able to function given a least developed economy where financial markets are inactive and economic growth is low. Design/methodology/approach – A theoretical general equilibrium model is...
Persistent link: https://www.econbiz.de/10014702269
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Liquidity Traps, Learning and Stagnation
Evans, George W.; Guse, Eran; Honkapohja, Seppo - 2007
We examine global economic dynamics under learning in a New Keynesian model in which the interest-rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is locally but not globally stable. Large pessimistic shocks to expectations can lead...
Persistent link: https://www.econbiz.de/10010260581
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Is forward-looking inflation targeting destabilizing? The role of policy's response to current output under endogenous investment
Huang, Kevin X. D.; Meng, Qinglai - 2007
in response solely to future inflation induce real indeterminacy of equilibrium. Applying the Samuelson … by itself has a quantitatively negligible effect and almost all strict inflation-targeting rules lead to indeterminacy … stickiness, indeterminacy is much less likely to occur as policy also responds to output. With estimated labor supply elasticity …
Persistent link: https://www.econbiz.de/10010260586
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Monetary equilibria in a cash-in-advance economy with incomplete financial markets
Bai, Jinhui H.; Schwarz, Ingolf - 2005
The general equilibrium model with incomplete financial markets (GEI) is extended by adding fiat money, fiscal and monetary policy and a cash-in-advance constraint. The central bank either pegs the interest rate or money supply while the fiscal authority sets a Ricardian or a non-Ricardian...
Persistent link: https://www.econbiz.de/10010264772
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Equilibrium Selection and Monetary Policy; A Natural Rate Perspective
Meyer-Gohde, Alexander - 2010
The analysis of this paper examines the uniqueness of equilibria in a broad class of dynamic monetary models that satisfy Lucas's (1972) natural rate hypothesis (NRH). For a given demand specification, the resulting bounds for determinacy on monetary policy's interest rate rule are the same for...
Persistent link: https://www.econbiz.de/10010270740
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Determinacy and learnability of monetary policy rules in small open economies
Llosa, Gonzalo; Tuesta, Vicente - 2006
managed exchange rate rules can help to alleviate problems of both indeterminacy and expectational instability, yet these …
Persistent link: https://www.econbiz.de/10010278266
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Endogenous income taxes in OLG economies: A clarification
Chen, Yan; Zhang, Yan - Volkswirtschaftliche Fakultät, … - 2009
with the previous result that the existence of endogenous labor income taxes raises the possibility of local indeterminacy … consumption--to--wage ratio associated with local indeterminacy, because of two conflicting effects on savings that operate …
Persistent link: https://www.econbiz.de/10004976966
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Monetary and Fiscal Policy under Learning in the Presence of a Liquidity Trap
Evans, George W. - In: Monetary and Economic Studies 26 (2008) December, pp. 59-86
This paper reports on the findings of Evans, Guse, and Honkapohja (2007) concerning the global economic dynamics under learning in a New Keynesian model in which the interest rate rule is subject to the zero lower bound. Under normal monetary and fiscal policy, the intended steady state is...
Persistent link: https://www.econbiz.de/10004978220
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Indeterminacy with No-Income-Effect Preferences and Sector-Specific Externalities
Guo, Jang-Ting; Harrison, Sharon G. - Department of Economics, University of California-Riverside - 2008
leisure. Unlike in the one-sector counterpart, we show that equilibrium indeterminacy can result with sufficiently high … the threshold level of returns-to-scale needed for generating indeterminacy and sunspots. This finding turns out to be … exactly the opposite of that in all existing RBC-based indeterminacy studies. …
Persistent link: https://www.econbiz.de/10004979870
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Are Stationary Hyperinflation Paths Learnable?
Adam, Klaus; Evans, George W.; Honkapohja, Seppo - Center for Financial Studies - 2004
Earlier studies of the seigniorage inflation model have found that the high-inflation steady state is not stable under adaptive learning. We reconsider this issue and analyze the full set of solutions for the linearized model. Our main focus is on stationary hyperinflationary paths near the...
Persistent link: https://www.econbiz.de/10005120784