2011-01-12Buch DOI: 10.18452/4296
Sticky Information and Determinacy
The infinite-dimensional sticky-information Phillips curve is cast as a finite-dimensional timevarying system of difference equations in order to directly assess determinacy in the model with demand given by the forward-looking IS equation and monetary policy by an interest rate rule. An equivalence to the model without lagged expectations holds (albeit tenuously) for the particular specification and a common truncation method produces spurious determinacy.
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