Endogenous Fluctuations in an Endogenous Growth Model with Inflation Targeting
Rangan Gupta () and
Lardo Stander ()
No 201432, Working Papers from University of Pretoria, Department of Economics
This paper develops a monetary endogenous growth overlapping generations model characterized by production lags - specifically lagged capital inputs - and an inflation targeting monetary authority, and analyses the growth dynamics that emerge from this framework. The growth process is endogenized by allowing productive government expenditure on infrastructure, complementing the lagged private capital input. Following the extant literature, money is introduced by imposing a cash reserve requirement on an otherwise competitive banking sector. Given this framework, we show that multiple equilibria emerge along different growth paths, with the low-growth (high-growth) equilibrium being unstable (stable) and locally determinate (locally indeterminate). In addition, we show that convergent or divergent endogenous fl uctuations and even topological chaos could emerge around the high-growth equilibrium in the growth path where the monetary authority follows a high inflation targeting regime. Conversely, when the monetary authority follows a low inflation targeting regime, oscillations do not occur around either the low-growth or high-growth equilibrium.
Keywords: Endogenous fl uctuations; in flation targeting; chaos; production lags; indeterminacy (search for similar items in EconPapers)
JEL-codes: C62 E32 O42 (search for similar items in EconPapers)
Pages: 21 pages
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-gro, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201432
Access Statistics for this paper
More papers in Working Papers from University of Pretoria, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Rangan Gupta ().