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The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa

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On Equilibrium Determinacy in New Keynesian Models with Staggered Wage and Price Setting

Peter Flaschel
  • 1Bielefeld University,
/ Reiner Franke
  • 2Christian-Albrechts-University in Kiel,
/ Christian R. Proaño
  • 3Macroeconomic Policy Institute (IMK),
Published Online: 2008-12-02 | DOI: https://doi.org/10.2202/1935-1690.1802

This paper shows that an analytical analysis of the determinacy properties of the New Keynesian model with both staggered wages and prices is possible, despite the high dimensional nature (4D) of this model, if it is appropriately reformulated in continuous time. Our analysis supports Galí's (2008) numerical findings on the determinacy frontier and its reformulated Taylor principle, where a generalized Taylor rule that employs a weighted combination of wage and price inflation as a measure of the inflation gap is used.

Keywords: New Keynesian models; determinacy

About the article

Published Online: 2008-12-02

Citation Information: The B.E. Journal of Macroeconomics, ISSN (Online) 1935-1690, DOI: https://doi.org/10.2202/1935-1690.1802. Export Citation

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