A NOTE ON TREND GROWTH AND LEARNING ABOUT MONETARY POLICY RULES IN A TWO-BLOCK WORLD ECONOMY

Eric Schaling () and Mewael F. Tesfaselassie

Macroeconomic Dynamics, 2017, vol. 21, issue 1, 243-258

Abstract: We analyze the implications of openness and growth for determinacy and learnability of rational expectations equilibria in a two-country New Keynesian model with alternative monetary policy rules. Under the contemporaneous data rule, the conditions for determinacy and learnability become more stringent as a result of openness but less stringent as a result of growth, so that growth weakens the effect of openness. Under the expectations-based rule, the conditions for determinacy and learnability also become more stringent as a result of openness, whereas as a result of trend growth the conditions for determinacy also become more stringent (thus reinforcing the effect of openness) but those for learnability become less stringent (thus weakening the effect of openness). As in related studies, the elasticity of intertemporal substitution is key to our result, but within a framework that is consistent with long-run labor supply and balanced growth facts.

Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:21:y:2017:i:01:p:243-258_00

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().