Interest-rate rule and multiple equilibria with endogenous growth

Kazuo Mino and Jun-ichi Itaya ()

Economics Bulletin, 2004, vol. 5, issue 6, 1-8

Abstract: This paper examines the role of interest-rate feedback rule in a monetary endogenous growth model in which money is introduced via a cash-in-advance constraint and long-run growth is sustained by external increasing returns. It is shown that dynamic properties as well as the balanced-growth characterization are highly sensitive not only to the degree of increasing returns but also to the interest-rate feedback rule adopted by the monetary authority. In particular, the conditions for indeterminacy of equilibrium depends heavily upon whether the interest-rate rule is active or passive.

Keywords: endogenous; growth (search for similar items in EconPapers)
JEL-codes: E5 O4 (search for similar items in EconPapers)
Date: 2004-02-26
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Citations: View citations in EconPapers (6)

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