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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

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
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Citations: View citations in EconPapers (5) Track citations by RSS feed

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https://www.econstor.eu/bitstream/10419/213930/2/2 ... 20With%20Figures.pdf (application/pdf)

Related works:
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2020) Downloads
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2020) Downloads
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2020) Downloads
Working Paper: Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy (2020) Downloads
Working Paper: Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy (2020) Downloads
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2017) Downloads
Working Paper: Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy (2017) Downloads
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