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Determinacy of Equilibrium in a New Keynesian Model with Monetary Policy Lag

Received: 11 December 2014     Accepted: 12 January 2015     Published: 22 January 2015
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Abstract

We use the New Keynesian continuous-time framework to theoretically investigate the effects of a lag in a central bank’s response to economic fluctuations (i.e., monetary policy lag) on local equilibrium determinacy. In the case of a policy without lag, equilibrium is indeterminate even though a central bank’s policy response is sufficiently active. However, in the case of a policy with lag, an active monetary policy can contribute to local equilibrium determinacy if the lag is modest.

Published in International Journal of Economic Behavior and Organization (Volume 3, Issue 2-1)

This article belongs to the Special Issue Recent Developments of Economic Theory and Its Applications

DOI 10.11648/j.ijebo.s.2015030201.14
Page(s) 15-22
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Money in the Production Function (MIPF) Model, Policy Lag, System of Delay Differential Equations, Monetary Policy Rule, Taylor Principle

References
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[17] A. Matsumoto and F. Szidarovszky, “An elementary study of a class of dynamic systems with two time delays,” Cubo (Temuco), vol. 14(3), pp.103–113, 2012.
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Cite This Article
  • APA Style

    Eiji Tsuzuki. (2015). Determinacy of Equilibrium in a New Keynesian Model with Monetary Policy Lag. International Journal of Economic Behavior and Organization, 3(2-1), 15-22. https://doi.org/10.11648/j.ijebo.s.2015030201.14

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    ACS Style

    Eiji Tsuzuki. Determinacy of Equilibrium in a New Keynesian Model with Monetary Policy Lag. Int. J. Econ. Behav. Organ. 2015, 3(2-1), 15-22. doi: 10.11648/j.ijebo.s.2015030201.14

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    AMA Style

    Eiji Tsuzuki. Determinacy of Equilibrium in a New Keynesian Model with Monetary Policy Lag. Int J Econ Behav Organ. 2015;3(2-1):15-22. doi: 10.11648/j.ijebo.s.2015030201.14

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  • @article{10.11648/j.ijebo.s.2015030201.14,
      author = {Eiji Tsuzuki},
      title = {Determinacy of Equilibrium in a New Keynesian Model with Monetary Policy Lag},
      journal = {International Journal of Economic Behavior and Organization},
      volume = {3},
      number = {2-1},
      pages = {15-22},
      doi = {10.11648/j.ijebo.s.2015030201.14},
      url = {https://doi.org/10.11648/j.ijebo.s.2015030201.14},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.s.2015030201.14},
      abstract = {We use the New Keynesian continuous-time framework to theoretically investigate the effects of a lag in a central bank’s response to economic fluctuations (i.e., monetary policy lag) on local equilibrium determinacy. In the case of a policy without lag, equilibrium is indeterminate even though a central bank’s policy response is sufficiently active. However, in the case of a policy with lag, an active monetary policy can contribute to local equilibrium determinacy if the lag is modest.},
     year = {2015}
    }
    

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    AU  - Eiji Tsuzuki
    Y1  - 2015/01/22
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    JO  - International Journal of Economic Behavior and Organization
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    AB  - We use the New Keynesian continuous-time framework to theoretically investigate the effects of a lag in a central bank’s response to economic fluctuations (i.e., monetary policy lag) on local equilibrium determinacy. In the case of a policy without lag, equilibrium is indeterminate even though a central bank’s policy response is sufficiently active. However, in the case of a policy with lag, an active monetary policy can contribute to local equilibrium determinacy if the lag is modest.
    VL  - 3
    IS  - 2-1
    ER  - 

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Author Information
  • Faculty of Economics, Chiba Keizai University, Chiba, Japan

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