Determinacy and Sunspots in a Nonlinear Monetary Model

Anna Agliari, Alessandra Cornaro

Research output: Contribution to journalArticle

Abstract

In this paper we analyze a basic sticky price model with monopolistic competition and price stickiness à la Calvo. Starting by the relations describing 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 dependence 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 fi nd, for some policy and elasticity parameters, the conditions under which it is possible.
Original languageEnglish
Pages (from-to)311-331
Number of pages21
JournalJournal of Interdisciplinary Mathematics
Volume2014 - Volume 17
DOIs
Publication statusPublished - 2014

Keywords

  • Determinacy
  • Monetary Policy
  • Nonlinear Dynamical Model
  • Sunspots

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