Capital accumulation, sectoral heterogeneity and the Taylor principle

Tommy Sveen ()

Journal of Economic Dynamics and Control, 2014, vol. 44, issue C, 20-28

Abstract: In the presence of capital accumulation the Taylor principle may not be sufficient for determinacy under reasonable parameter values. In this paper I consider a two-sector extension of the models used in the existing literature. I show that what matters for whether the Taylor principle is sufficient is the price stickiness of investment goods. Price stickiness of consumer goods on the other hand matters very little. The Taylor principle is sufficient, I find, unless there is considerable price stickiness in the investment-goods sector.

Keywords: The Taylor principle; Sectoral heterogeneity (search for similar items in EconPapers)
JEL-codes: E22 E31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:44:y:2014:i:c:p:20-28

DOI: 10.1016/j.jedc.2014.04.007

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