Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy

Jean-Bernard Chatelain and Kirsten Ralf

EconStor Open Access Articles and Book Chapters, 2020, issue Forthcoming

Abstract: This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of the dynamic properties. This bifurcation occurs because of the ad hoc assumption that interest rate is a forward-looking variable when policy targets (inflation and output gap) are forward-looking variables in the new-Keynesian theory.

Keywords: Taylor rule; Bifurcation; Ramsey optimal policy; New-Keynesian Model (search for similar items in EconPapers)
JEL-codes: C61 C62 E43 E47 E52 E58 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: HOPF BIFURCATION FROM NEW-KEYNESIAN TAYLOR RULE TO RAMSEY OPTIMAL POLICY (2021)
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2021)
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2021)
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2020)
Working Paper: Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy (2020)
Working Paper: Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy (2020)
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2017)
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