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Endogenous growth and the Taylor principle

Martin Micheli ()

No 726, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This paper analyzes conditions for determinacy in a new Keynesian model with endogenous growth. Endogenous growth shrinks the determinacy region considerably. Complying with the Taylor principle is not sufficient for determinacy, which decreases in the spillovers from actual on potential output. Monetary policy therefore has to be more aggressive than in an exogenous growth setup to ensure determinacy.

Keywords: Endogenous growth; business cycle; monetary policy; Taylor principle (search for similar items in EconPapers)
JEL-codes: E32 E52 O42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:726

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