Determinacy analysis in high order dynamic systems: The case of nominal rigidities and limited asset market participation

Guido Ascari, Andrea Colciago and Lorenza Rossi

Economics Letters, 2017, vol. 159, issue C, 82-87

Abstract: We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria (REE) in Dynamic General Equilibrium models (DGE). We apply this method to a model characterized by sticky wages and prices and by limited asset market participation (LAMP). We prove analytically in a fourth-order dynamics system that, once nominal wage stickiness is taken into account, LAMP does not invalidate the Taylor Principle.

Keywords: Determinacy; High-order dynamics; Sticky wages; Non-Ricardian household (search for similar items in EconPapers)
JEL-codes: C62 E50 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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Working Paper: Determinacy analysis in high order dynamic systems: The case of nominal rigidities and limited asset market participation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:159:y:2017:i:c:p:82-87

DOI: 10.1016/j.econlet.2017.05.040

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