The Role of the Taylor Principle in the neo-Kaleckian Model when applied to an Endogenous Market Structure

This study examines the effect of using the neo-Kaleckian model to target inflation. Here, we assume the following: a model with monopolistic competition, a symmetric economy, the inflation conflict theory, the target profit share of firms depends on the number of firms, and free entry. Using the neo-Kaleckian model, we find the Taylor principle destabilizes the system, which means that an inelastic nominal interest monetary policy is a plausible way to ensure stability. In addition, we find that the Taylor principle is not compatible with the standard neo-Kaleckian results, including the effects of independent demand and income distribution in favour of workers.