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Equilibrium Determinacy of Endogenous Growth with Generalized Taylor Rule: A Discrete-Time Analysis

Seiya Fujisaki ()
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Seiya Fujisaki: Graduate School of Economics, Osaka University

No 08-21, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper examines equilibrium determinacy of a discrete-time AK growth model with a generalized Taylor rule under which interest rate responds to the growth rate of real income as well as to the rate of inflation. We use the standard money-in-the-utility formulation in which money is superneutral on the balanced-growth path. We show that even in such a simple environment, the generalized Taylor rule may yield indeterminacy of equilibrium easily. We also demonstrate that equilibrium determinacy depends on the timing of money holding of households as well.

Keywords: equilibrium determinacy; the Taylor rules; endogenous growth; timing of money holdings (search for similar items in EconPapers)
JEL-codes: E52 O42 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-04
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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