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- Title
Generalizing the Taylor Principle: Comment.
- Authors
Farmer, Roger E. A; Waggoner, Daniel F; Zha, Tao
- Abstract
Troy Davig and Eric Leeper (2007) have proposed a condition they call the generalized Taylor principle to rule out indeterminate equilibria in a version of the new-Keynesian model where the parameters of the policy rule follow a Markov-switching process. We show that although their condition rules out a subset of indeterminate equilibria, it does not establish uniqueness of the fundamental equilibrium. We discuss the differences between indeterminate fundamental equilibria included by Davig and Leeper's condition and fundamental equilibria that their condition misses
- Subjects
TAYLOR'S rule; MATHEMATICAL models of monetary policy; MARKOV processes; ECONOMIC equilibrium; KEYNESIAN economics; ECONOMETRICS
- Publication
American Economic Review, 2010, Vol 100, Issue 1, p608
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.100.1.608