Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Determinacy analysis in high order dynamic systems : The case of nominal rigidities and limited asset market participation. / Ascari, G.; Colciago, A.; Rossi, L.
In: Economics Letters, Vol. 159, 31.10.2017, p. 82-87.Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Determinacy analysis in high order dynamic systems
T2 - The case of nominal rigidities and limited asset market participation
AU - Ascari, G.
AU - Colciago, A.
AU - Rossi, L.
PY - 2017/10/31
Y1 - 2017/10/31
N2 - We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria (REE) in Dynamic General Equilibrium models (DGE). We apply this method to a model characterized by sticky wages and prices and by limited asset market participation (LAMP). We prove analytically in a fourth-order dynamics system that, once nominal wage stickiness is taken into account, LAMP does not invalidate the Taylor Principle.
AB - We show how to use Hurwitz polynomials to study the stability and uniqueness of Rational Expectation equilibria (REE) in Dynamic General Equilibrium models (DGE). We apply this method to a model characterized by sticky wages and prices and by limited asset market participation (LAMP). We prove analytically in a fourth-order dynamics system that, once nominal wage stickiness is taken into account, LAMP does not invalidate the Taylor Principle.
KW - Determinacy
KW - High-order dynamics
KW - Non-Ricardian household
KW - Sticky wages
U2 - 10.1016/j.econlet.2017.05.040
DO - 10.1016/j.econlet.2017.05.040
M3 - Journal article
VL - 159
SP - 82
EP - 87
JO - Economics Letters
JF - Economics Letters
SN - 0165-1765
ER -