MONETARY POLICY, MULTIPLE EQUILIBRIA AND HYSTERESIS EFFECTS ON THE LABOR MARKET

Willi Semmler and Alfred Greiner

No 196, Computing in Economics and Finance 2000 from Society for Computational Economics

Abstract: In this paper we demonstrate that a standard loss function of a central bank may generate multiple equilibria which can contribute to hysteresis effects on the labor market. Multiple equilibria are feasible if the objective function of the central bank is non-quadratic. Such preferences may arise if the weights for output and inflation stabilization are state dependent, for example, if output stabilization is more important for low levels of actual output compared to higher levels (or inflation stabilization is more important for high inflation rates than for low rates). As further shown (in the appendix of the paper) non-quadratic central bank preferences may also be due to other reasons. We show how both the Hamiltonian function as well as the Bellman equation can be used to solve the monetary control problem with multiple equilibria.

Date: 2000-07-05
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:sce:scecf0:196

Access Statistics for this paper

More papers in Computing in Economics and Finance 2000 from Society for Computational Economics CEF 2000, Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25,27, 08005, Barcelona, Spain. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().