Monetary policy switching and indeterminacy

• 成果类型: Article
• 署名作者: Barthelemy, Jean; Marx, Magali
• 署名单位: European Central Bank; Bank of France; Institut d'Etudes Politiques Paris (Sciences Po)
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7323
• DOI: 10.3982/QE673
• 发表日期: 2019
• 页码: 353-385
• 关键词: Markov-switching; indeterminacy; monetary policy

摘要

This paper determines conditions for the existence of a unique rational expectations equilibrium-determinacy-in a monetary policy switching economy. We depart from the existing literature by providing such conditions considering all bounded equilibria. We then apply these conditions to a new Keynesian model with switching Taylor rules. First, deviation from the Taylor principle in one regime does not necessarily cause indeterminacy. Second, very different responses to inflation may trigger indeterminacy even if both regimes satisfy the Taylor principle. Determinacy thus results from the adequacy between monetary regimes rather than the determinacy of each of them taken in isolation.