Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/31691
Authors: 
Hanssgen, Greg
Year of Publication: 
2006
Series/Report no.: 
Working papers // The Levy Economics Institute 448
Abstract: 
The Gibson paradox,long observed by economists and named by John Maynard Keynes (1936),is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation.In the mode,spending is driven in part by changes in the rate of interest, and the central bank sets the interest rate using a policy rule based on the levels of output and inflation. The model shows that the cost-push effect of inflation, long known as Gibson's paradox, intensifies destabilizing forces and can be involved in the generation of cycles.
Subjects: 
Gibson's Paradox
Inflation
Monetary Policy Rules : Nonlinear Dynamics
Hopf Bifurcation
JEL: 
E12
E32
E52
Document Type: 
Working Paper

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