In this paper we analyze a basic sticky price model with monopolistic competition and price stickiness à la Calvo. Starting by the relations de- scribing a general economic equilibrium model (see Woodford in Interest and Prices, Foundations of a Theory of Monetary Policy, The MIT Press, 2003), as it results from the optimizing behavior of the private agents, we provide a nonlinear model for the monetary policy analysis. This kind of model is a candidate for the existence of multiple equilibria, with a de- pendence of exogenous sunspots. We explore the stability of such a model combined with interest rate rules in order to investigate the determinacy of the model and we nd, for some policy and elasticity parameters, the conditions under which it is possible.
|Number of pages||18|
|Publication status||Published - 2010|
- Monetary policy
- Nonlinear dynamic model