New Principles For Stabilization Policy

Olivier Loisel

No 2022-16, Working Papers from Center for Research in Economics and Statistics

Abstract: In a broad class of discrete-time rational-expectations models, I consider stabilizationpolicy rules making the policy instrument react with coecient ϕ ∈ R to a (past, current, or expected future) generic variable at time horizon h ∈ Z, possibly among other variables. Using two complex-analysis theorems, I establish some simple, necessary or sucient conditions on ϕ and h for these rules to ensure local-equilibrium determinacy. These conditions lead to new, general principles for stabilization policy. Building on these conditions, I characterize the circumstances under which (a generalized version of) the Taylor principle is necessary or sucient for determinacy. I also provide the rst hard guidelines for nding rules with robust determinacy properties across alternative models.

Keywords: Stabilization policy; policy-instrument rule; local-equilibrium determinacy; Taylor principle; backward- and forward-looking policy; Rouché's theorem; Erdös-Turán theorem. (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2022-08-18
New Economics Papers: this item is included in nep-cba
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: New Principles For Stabilization Policy (2025)
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