Transitional Dynamics in Monetary Economies: Numerical Solutions

Alfonso Novales, Esther Fernández and Jesus Ruiz

Chapter 9 in Economic Growth, 2022, pp 461-538 from Springer

Abstract: Abstract In Chap. 8 we characterized dynamic optimality conditions for monetary economies, but we only evaluated the steady-state effects of monetary policy. This chapter completes the analysis by characterizing the transitional dynamics of a monetary economy, as it moves from its initial condition to the steady-state, following a monetary policy intervention. We analyze the potential instability of public debt, an issue that restricts the set of feasible policies. We study both neoclassical and new Keynesian monetarist models, of the kind that are increasingly used at central banks around the world. We describe their theoretical foundations and characterize analytically the equilibrium conditions. After that, we present in detail the methodology to obtain numerical solutions to these models, which allows for the analysis of effects of different policy interventions.

Keywords: Monetary policy; Money supply; Public debt; Nominal interest rate; Time path; New Keynesian monetarist model; Nominal indeterminacy (search for similar items in EconPapers)
Date: 2022
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Chapter: Transitional Dynamics in Monetary Economies: Numerical Solutions (2014)
Chapter: Transitional Dynamics in Monetary Economies: Numerical Solutions (2009)
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DOI: 10.1007/978-3-662-63982-5_9

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