Sticky information and determinacy

Alexander Meyer-Gohde

No 2011-006, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: The infinite-dimensional sticky-information Phillips curve is cast as a finite-dimensional timevarying system of difference equations in order to directly assess determinacy in the model with demand given by the forward-looking IS equation and monetary policy by an interest rate rule. An equivalence to the model without lagged expectations holds (albeit tenuously) for the particular specification and a common truncation method produces spurious determinacy.

Keywords: determinacy; Taylor rule; sticky Information; time-varying difference equations (search for similar items in EconPapers)
JEL-codes: C62 E31 E43 E52 (search for similar items in EconPapers)
Date: 2011
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