A BEJM Topics article.

Abstract

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.

Submitted: July 28, 2008 · Accepted: October 25, 2008 · Published: December 2, 2008

Recommended Citation

Flaschel, Peter; Franke, Reiner; and Proaño, Christian R. (2008) "On Equilibrium Determinacy in New Keynesian Models with Staggered Wage and Price Setting," The B.E. Journal of Macroeconomics: Vol. 8 : Iss. 1 (Topics), Article 31.
DOI: 10.2202/1935-1690.1802
Available at: http://www.bepress.com/bejm/vol8/iss1/art31