The role of the Taylor principle in the neo-Kaleckian model when applied to an endogenous market structure

Takashi Ohno

Structural Change and Economic Dynamics, 2014, vol. 31, issue C, 32-42

Abstract: This study examines the effect of using the neo-Kaleckian model to target inflation. Here, we assume the following: a model with monopolistic competition, a symmetric economy, the inflation conflict theory and the target profit share of firms depends on the number of firms and free entry. Using the neo-Kaleckian model, we find the Taylor principle destabilizes the system, which means that an inelastic nominal interest monetary policy is a plausible way to ensure stability. In addition, we find that the Taylor principle is not compatible with the standard neo-Kaleckian results, including the effects of independent demand and income distribution in favour of workers.

Keywords: E24; E31; Neo-Kaleckian model; Taylor principle; Free entry (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:31:y:2014:i:c:p:32-42

DOI: 10.1016/j.strueco.2014.06.001

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