Ciência-IUL
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Descrição Detalhada da Publicação
Nonlinear inflation expectations and endogenous fluctuations
Título Revista
Czech Economic Review
Ano (publicação definitiva)
2010
Língua
Inglês
País
República Checa
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Abstract/Resumo
The standard new Keynesian monetary policy problem is, in its original presentation, a linear model. As a result, only three possibilities are admissible in terms of long term dynamics: the equilibrium may be a stable node, an unstable node or a saddle point. Fixed point stability (a stable node) is generally guaranteed only under an active monetary policy rule. The benchmark model also considers extremely simple assumptions about expectations (perfect foresight is frequently assumed). In this paper, one inquires how a change in the way inflation expectations are modelled implies a change in monetary policy results when an active Taylor rule is taken. By assuming that inflation expectations are constrained by the evolution of the output gap, we radically modify the implications of policy intervention: endogenous cycles, of various periodicities, and chaotic motion will be observable for reasonable parameter values.
Agradecimentos/Acknowledgements
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Palavras-chave
Endogenous business cycles; Inflation expectations; Monetary policy; Nonlinear dynamics and chaos; Taylor rule
Classificação Fields of Science and Technology
- Economia e Gestão - Ciências Sociais