Revisiting the determinacy on New Keynesian Models

17 May 2018  ·  Boix Alberto F., Moreiras Adrián Segura ·

The goal of this paper is to shed light on the determinacy question that arises in New Keynesian models as result of a combination of several monetary policy rules; in these models, we provide conditions to guarantee existence and uniqueness of equilibrium by means of results that are obtained from theoretical analysis. In particular, we show that Taylor--like rules in interest rate setting are not the only way to reach determinacy of the rational expectations equilibrium in the New Keynesian setting. The key technical tool that we use for that purposes is the so--called Budan--Fourier Theorem, that we review along the paper.

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