Cost channel, determinacy, and monetary policy in a two-country new Keynesian model

Daisuke Ida

Economic Modelling, 2023, vol. 119, issue C

Abstract: This study examines the role of the cost channel of monetary policy in a two-country new Keynesian model. The results demonstrate that the presence of the cost channel significantly affects worldwide equilibrium determinacy. A greater foreign cost channel widens worldwide equilibrium indeterminacy when home and foreign central banks respond strongly to inflation and the output gap. This phenomenon is exacerbated when a greater cost channel exists simultaneously in both countries.

Keywords: Cost channel; Equilibrium determinacy; Financial market imperfections; Taylor rule; Two-country new Keynesian model (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:119:y:2023:i:c:s0264999322003492

DOI: 10.1016/j.econmod.2022.106112

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