Stability thresholds and oscillatory regimes in Taylor rule dynamics with firm heterogeneity

Jean Cortissoz

Economics Bulletin, 2026, vol. 46, issue 2, 549 - 557

Abstract: We analyze the stability of Taylor rule dynamics in a heterogeneous economy with loan-dependent firms. We identify an explicit threshold ?_?^* such that monetary policy stabilizes inflation if and only if the policy coefficient lies in the bounded interval (1, ?_?^*). The threshold depends on the share of loan-dependent firms and their interaction strength. When a nonlinear Phillips curve is introduced, crossing the threshold produces a stable limit cycle rather than divergence.

Keywords: Taylor rules; inflation stability; firm heterogeneity; dynamical systems; monetary policy; limit cycles (search for similar items in EconPapers)
JEL-codes: C6 E5 (search for similar items in EconPapers)
Date: 2026-06-30
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