Price indexation, habit formation, and the Generalized Taylor Principle

We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with positive steady-state inflation, interest rate smoothing in monetary policy, partial dynamic price indexation, and habit formation in consumption.

MoreLess

Year of publication:	2013
Authors:	Bhattarai, Saroj ; Lee, Jae Won ; Park, Woong Yong
Institutions:	Federal Reserve Bank of Dallas
Subject:	Price levels \| Monetary policy \| Banks and banking \| Central

More details

Extent:	application/pdf
Series:	Globalization and Monetary Policy Institute Working Paper.
Type of publication:	Book / Working Paper
Notes:	Number 152
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010687005