Price Indexation, Habit Formation, and the Generalized Taylor Principle
Saroj Bhattarai,
Jae Won Lee and
Woong Yong Park
CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University
Abstract:
We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with positive steady-state inflation, interest rate smoothing in monetary policy, partial dynamic price indexation, and habit formation in consumption.
Keywords: Determinacy; Generalized Taylor Principle; Sticky prices; Price indexation; Habit formation; Steady-state inflation (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-09
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... attarai_lee_park.pdf (application/pdf)
Related works:
Journal Article: Price indexation, habit formation, and the Generalized Taylor Principle (2014) 
Working Paper: Price indexation, habit formation, and the Generalized Taylor Principle (2013) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2013-52
Access Statistics for this paper
More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().