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- Title
Rethinking Macroeconomic Policy within a Simple Dynamic Model.
- Authors
Almudi, Isabel; Fatas ‐ Villafranca, Francisco; Jarne, Gloria; Sanchez ‐ Choliz, Julio
- Abstract
We propose a simple macro-dynamic model to rethink standard policy prescriptions. Our model includes exogenous growth, endogenous capital accumulation and debt, demand-driven production with a non-linear IS curve, a dynamic Phillips curve, and fiscal and monetary policy instruments. It has multiple steady states with different stability properties, and it is analytically tractable to a significant extent. We complete the analytical results with simulations. We find alternative growth patterns, endogenous fluctuations, and demand-driven level effects even in the long-run. For certain steady states the model shows saddle-path type instabilities, which lead us to reflect on fiscal and monetary policy standards.
- Subjects
DYNAMIC models; DYNAMIC simulation; COMPUTER simulation; MACROECONOMICS -- Government policy; MONETARY policy
- Publication
Metroeconomica, 2017, Vol 68, Issue 3, p425
- ISSN
0026-1386
- Publication type
Article
- DOI
10.1111/meca.12133