It has often been found difficult to generate a liquidity effect (i.e., a negative effect of monetary injections on the nominal interest rate) in the traditional "Ricardian" stochastic dynamic model with a single infinitely lived household. We show that moving to a non-Ricardian environment...

The Taylor principle is quite usually considered as a central condition for price determinacy. Recently, however, this has been questioned on several grounds, notably because (i) this condition is a condition for local determinacy, not global determinacy (ii) it has been derived in Ricardian...