EconPapers    
Economics at your fingertips  
 

Hopf Bifurcation from new-Keynesian Taylor rule to Ramsey Optimal Policy

Jean-Bernard Chatelain () and Kirsten Ralf

Working Papers from HAL

Abstract: This paper shows that a shift from Ramsey optimal policy under short term commitment (based on a negative-feedback mechanism) to a Taylor rule (based on positive-feedback mechanism) in the new-Keynesian model is in fact a Hopf bifurcation, with opposite policy advice. The number of stable eigenvalues corresponds to the number of predetermined variables including the interest rate and its lag as policy instruments for Ramsey optimal policy. With a new-Keynesian Taylor rule, however, these policy instruments are arbitrarily assumed to be forward-looking variables when policy targets (inflation and output gap) are forward-looking variables. For new-Keynesian Taylor rule, this Hopf bifurcation implies a lack of robustness and multiple equilibria if public debt is not set to zero for all observation.

Keywords: Bifurcations; Taylor rule; Taylor principle; new-Keynesian model; Ramsey optimal policy; Finite horizon commitment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2017-05-19
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01527872
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
https://hal.archives-ouvertes.fr/hal-01527872/document (application/pdf)

Related works:
Working Paper: Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy (2018) 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
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:hal:wpaper:hal-01527872

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2019-04-18
Handle: RePEc:hal:wpaper:hal-01527872