Symmetry condition and re-assessing Blanchard-Kiyotaki decades later

Minseong Kim

MPRA Paper from University Library of Munich, Germany

Abstract: We re-assess Blanchard-Kiyotaki (1987). We conclude that there are multiple equilibria even under the flexible-price Blanchard-Kiyotaki model, and that the model only obtains equilibrium uniqueness through the symmetry condition that is partially justified only when there are infinitely many firms. Without imposition of the symmetry condition, monetary policy has a significant role in determining a flexible-price equilibrium under the Blanchard-Kiyotaki setup. While the Blanchard-Kiyotaki framework is becoming deprecated, the symmetry condition is still sometimes invoked in monopolistic competition literature, and thus logic behind it is in need of more scrutiny. We discuss implications on understanding New Keynesian paradoxes in zero lower bound circumstances.

Keywords: Blanchard-Kiyotaki; symmetry condition; New Keynesian economics; multiple equilibria; monetary non-neutrality; monopolistic competition; New Keynesian paradoxes; zero lower bound (search for similar items in EconPapers)
JEL-codes: B22 B41 E13 E30 E50 E60 (search for similar items in EconPapers)
Date: 2019-10-12, Revised 2019-11-11
New Economics Papers: this item is included in nep-dge and nep-mac
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https://mpra.ub.uni-muenchen.de/96945/1/MPRA_paper_96945.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/97010/1/MPRA_paper_97010.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/100419/1/MPRA_paper_100419.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/100443/1/MPRA_paper_100443.pdf revised version (application/pdf)

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