Description |
1 online resource (40 pages) : illustrations |
Series |
IMF working paper ; WP/12/121 |
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IMF working paper ; WP/12/121.
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Contents |
Cover; Table of Contents; I. Introduction; II. A Flexible-Price Model; A. The Household-Firm Unit; B. The Government; C. International Capital Markets; D. Equilibrium; III. Local and Global Dynamics; A. Local Determinacy; B. Cycles and Chaos; B.1. The Main Results from a Global Non-linear Analysis; Tables; Table 1. Local versus Global Analysis; Table 2. Parametrization; Figures; Figure 1. Local and Global Equilibrium Analyses for Forward-Looking Rules; Figure 2. Orbit-Bifurcation Diagrams for the Degree of Openness; Figure 3. Lyapunov Exponents for Forward-Looking Rules |
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B.2. An Intuition of the ResultsTable 3. Openness, Risk Aversion, and Cycles; B.3. Policy Activism and the Degree of Openness; Table 4. Activism, Cycles, and Chaos; Figure 4. Basins of Attraction for Forward-Looking Rules; IV. Extensions and Robustness; A. Incomplete Exchange Rate Pass-Through; B. Incomplete Markets; Figure 5. Orbit-Bifurcation Diagrams for the Degree of Exchange Rate Pass-Through; C. Alternative Timings for the Policy Rule; D. Cash-in-Advance Timing of Money in Utility; E. Constant-Elasticity-of-Substitution (CES) Preference |
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Figure 6. Orbit-Bifurcation Diagrams with CES PreferencesF. Constant-Return-to-Scale (CRS) Technologies; V. Conclusions; Appendix; A. Proofs and Propositions; A.1. Proof of Proposition 1; A.2. Proof of Proposition 2; A.3. Proof of Proposition 3; Figure 7. The mapping R[(sub(t+1)] = f(R[sub(t)]) for Forward-Looking Rules; A.4. Proof of Proposition 5; B. Contemporaneous Rules; Figure 8. The implicit mapping R[(sub(t+1)] = f(R[sub(t)]) for Contemporaneous Rules; C. Backward-Looking Rules; D. Nominal Price Rigidities; E. Money in the Utility Function versus Money in the Production Function |
Summary |
We present an extensive analysis of the consequences for global equilibrium determinacy in flexible-price open economies of implementing active interest rate rules, i.e., monetary rules where the nominal interest rate responds more than proportionally to inflation. We show that conditions under which these rules generate aggregate instability by inducing liquidity traps, endogenous cycles, and chaotic dynamics depend on specific characteristics of open economies. In particular, rules that respond to expected future inflation are more prone to induce endogenous cyclical and chaotic dynamics the more open the economy to trade |
Bibliography |
Includes bibliographical references |
Subject |
Interest rates -- Econometric models
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Equilibrium (Economics) -- Econometric models
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Business cycles -- Econometric models
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Business cycles -- Econometric models
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Equilibrium (Economics) -- Econometric models
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Interest rates -- Econometric models
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Finance.
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Business & Economics.
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Credit, Debt & Loans.
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Form |
Electronic book
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Author |
Zanna, Luis-Felipe, author.
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International Monetary Fund. Research Department, issuing body.
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ISBN |
9781475503500 |
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1475503504 |
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