WebDeterminacy without the Taylor Principle Marios Angeletos and Chen Lian Slides by Marco Bassetto April 22, 2024 1/25. Introduction Setup Equilibrium Conclusion Weakness in Equilibrium Determinacy Whether we use the Taylor principle or the FTPL... WebUnder our perturbations, the unique surviving equilibrium is the same as that selected by the Taylor principle, but it no more relies on it; monetary policy is left to play only a stabilization role; and fiscal policy needs to be Ricardian, even when monetary policy is passive.
Author Page for Chen Lian :: SSRN
Weborder to ensure determinacy, the inflation coe cient in a Taylor rule must be signi cantly 1More precisely, the Taylor principle requires the coe cient on inflation to exceed unity if the central bank sets interest rates without reference to the output gap; the condition is relaxed slightly if the output gap WebThis paper studies the equilibrium determinacy properties of a simple interest rate rule in a small open economy subject to currency substitution (i.e., the use of a foreign currency for domestic transactions) and risk premia on foreign borrowing. It shows that if currencies are substitute in the provision of liquidity services the rule׳s response to inflation has to be … dwc clayton 52
Determinacy and Learnability of Monetary Policy Rules in …
Webcentral bank follows a standard Taylor rule that respects the ZLB. Fiscal policy is \passive" or \Ricardian" and hence plays no role in the determinacy of equilibria. Without a ZLB on interest rates, there is a unique steady state with zero in ation and the Taylor principle that nominal interest rates react more than one-for-one with in ation Webdiscuss in turn. Since we are concerned with issues of determinacy without loss of generality we limit the discussion to a deterministic model. As is well known, if the deterministic dynamics are not unique, then it is possible to construct sunspot equilibria in the model economy. College Foundation, October 27, 1998). Weba generalized Taylor principle. Naturally, the precise nature of the long-run Taylor principle depends on the model under consideration and the definition of determinacy employed. In any case, the generalized Taylor principle is alive and well. 1. Quasi-Linear vs. Linear Representations crystal freediving