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- Title
HOPF BIFURCATION FROM NEW-KEYNESIAN TAYLOR RULE TO RAMSEY OPTIMAL POLICY.
- Authors
Chatelain, Jean-Bernard; Ralf, Kirsten
- Abstract
This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of the dynamic properties. This bifurcation occurs because of the ad hoc assumption that interest rate is a forward-looking variable when policy targets (inflation and output gap) are forward-looking variables in the new-Keynesian theory.
- Subjects
TAYLOR'S rule; HOPF bifurcations; MONETARY policy; PRICE inflation
- Publication
Macroeconomic Dynamics, 2021, Vol 48, Issue 1, p2204
- ISSN
1365-1005
- Publication type
Article
- DOI
10.1017/S1365100519001032