A Proof of Determinacy in the New-Keynesian Sticky Wages and Prices Model

Reiner Franke and Peter Flaschel

No 2008-14, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: The paper is concerned with determinacy in a version of the New-Keynesian model that integrates imperfect competition and nominal price and wage setting on goods and labour markets. The model is reformulated with an explicit period of arbitrary length and shown to remain well-defined as the period shrinks to zero. The 4×4 constituent matrix of the model?s continuous-time counterpart is mathematically tractable and its determinacy results carry over to the period model at least if the period is sufficiently short. This being understood, it is proved that determinacy is (essentially) ensured if an extended Taylor principle requirement is met.

Keywords: Determinacy; New-Keynesian wage and price Phillips curves; variable period length; continuous-time limit; Taylor principle (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-lab and nep-mac
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:zbw:cauewp:7367

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