24,554 research outputs found
The Taylor principle and global determinacy in a non Ricardian world
The Taylor principle is quite usually considered as a central condition for price determinacy. Recently, however, this has been questioned on several grounds, notably because (i) this condition is a condition for local determinacy, not global determinacy (ii) it has been derived in "Ricardian" economies, and it appears that going to a non-Ricardian framework makes a very big difference for the determinacy conditions. In this paper we scrutinize the two issues together, and we find that for non-Ricardian equilibria the Taylor principle is replaced by another "financial dominance" criterion.Taylor principle ; Taylor rules ; global determinacy ; price determinacy ; non Ricardian economies ; non Ricardian equilibria
From winning strategy to Nash equilibrium
Game theory is usually considered applied mathematics, but a few
game-theoretic results, such as Borel determinacy, were developed by
mathematicians for mathematics in a broad sense. These results usually state
determinacy, i.e. the existence of a winning strategy in games that involve two
players and two outcomes saying who wins. In a multi-outcome setting, the
notion of winning strategy is irrelevant yet usually replaced faithfully with
the notion of (pure) Nash equilibrium. This article shows that every
determinacy result over an arbitrary game structure, e.g. a tree, is
transferable into existence of multi-outcome (pure) Nash equilibrium over the
same game structure. The equilibrium-transfer theorem requires cardinal or
order-theoretic conditions on the strategy sets and the preferences,
respectively, whereas counter-examples show that every requirement is relevant,
albeit possibly improvable. When the outcomes are finitely many, the proof
provides an algorithm computing a Nash equilibrium without significant
complexity loss compared to the two-outcome case. As examples of application,
this article generalises Borel determinacy, positional determinacy of parity
games, and finite-memory determinacy of Muller games
Monetary Policy, Determinacy, and the Natural Rate Hypothesis
Imposing the natural rate hypothesis (NRH) can dramatically alter the determinacy bounds on monetary policy by closing the output gap in the long run. I show that the hypothesis eliminates any role for the output gap in determinacy and renders the conditions for determinacy identical for all conforming supply equations. Specializing further to IS demand, determinacy depends only on the parameters in the interest rate rule and a pure forward or backward-looking inflation target is inconsistent with determinacy. Monetary policy that embodies the Taylor principle with respect to contemporaneous inflation delivers a determinate equilibrium in all models that satisfy the NRH.Time Series,Natural rate hypothesis; Phillips curve; Taylor Principle
Financial Integration and Aggregate Stability
This paper explores a two-country model of capital accumulation with country-specific production externalities. The main concern of our discussion is to investigate equilibrium determinacy (aggregate stability) conditions in a financially integrated world economy. We show that the well-established equilibrium determinacy conditions for the case of small-open economy are still valid if heterogeneity between two countries is small enough. As the technological difference between the countries increases, the equilibrium determinacy conditions may diverge from those for the small country setting.financial integration, two-country model, equilibrium determinacy, social constant returns
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