Price indexation, habit formation, and the Generalized Taylor Principle

Saroj Bhattarai, Jae Won Lee and Woong Yong Park

Journal of Economic Dynamics and Control, 2014, vol. 48, issue C, 218-225

Abstract: We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to a change in inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with interest rate smoothing in monetary policy, partial dynamic price indexation, and habit formation in consumption.

Keywords: Determinacy; Generalized Taylor Principle; Sticky prices; Price indexation; Habit formation (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Price Indexation, Habit Formation, and the Generalized Taylor Principle (2013)
Working Paper: Price indexation, habit formation, and the Generalized Taylor Principle (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:48:y:2014:i:c:p:218-225

DOI: 10.1016/j.jedc.2014.09.022

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