On global determinacy of New Keynesian models

Minseong Kim

No ygd9x, OSF Preprints from Center for Open Science

Abstract: New Keynesian models assume that inflation rate and output level are endogenous variables. However, given that firms are price setters and suppliers in the models, it is more reasonable to assume that, absent equilibrium coordination (or tatonnement) issues usually abstracted away, both variables actually are state variables determined by expectations in the past. This secures global equilibrium determinacy and a previously unavailable account of inflation rate for New Keynesian models. Furthermore, the principle of effective demand is implemented via the expectation channel.

Date: 2021-02-14
New Economics Papers: this item is included in nep-cwa, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:ygd9x

DOI: 10.31219/osf.io/ygd9x

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