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Title:A Proof of Determinacy in the New-Keynesian Sticky Wages and Prices Model PDF Logo
Authors:Franke, Reiner
Flaschel, Peter
Issue Date:2008
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2008,14
Abstract:The paper is concerned with determinacy in a version of the New-Keynesian model that integrates imperfect competition and nominal price and wage setting on goods and labour markets. The model is reformulated with an explicit period of arbitrary length and shown to remain well-defined as the period shrinks to zero. The 4×4 constituent matrix of the model?s continuous-time counterpart is mathematically tractable and its determinacy results carry over to the period model at least if the period is sufficiently short. This being understood, it is proved that determinacy is (essentially) ensured if an extended Taylor principle requirement is met.
Subjects:Determinacy
New-Keynesian wage and price Phillips curves
variable period length
continuous-time limit
Taylor principle
JEL:E52
E32
E31
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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