Gomes, Orlando (2007): Stability analysis in a monetary model with a varying intertemporal elasticity of substitution.

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Abstract
Models dealing with monetary policy are generally based on microfoundations that characterize the behaviour of representative agents (households and firms). To explain the representative consumer behaviour, it is generally assumed a utility function in which the intertemporal elasticity of substitution is constant. Recent literature casts some doubts about the relevance of considering such a constant elasticity value. In this note, we explore the new Keynesian monetary policy model under the assumption that the elasticity of substitution changes with expectations regarding real economic performance. As a result, one observes that some combinations of parameter values allow for a stable fixed point outcome, while other combinations of parameters are compatible with cycles of various periodicities and even aperiodic fluctuations.
Item Type:  MPRA Paper 

Institution:  Escola Superior de Comunicação Social  Instituto Politécnico de Lisboa 
Original Title:  Stability analysis in a monetary model with a varying intertemporal elasticity of substitution 
Language:  English 
Keywords:  Monetary policy; Intertemporal elasticity of substitution; Stability; Nonlinear dynamics 
Subjects:  C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62  Existence and Stability Conditions of Equilibrium E  Macroeconomics and Monetary Economics > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E52  Monetary Policy E  Macroeconomics and Monetary Economics > E3  Prices, Business Fluctuations, and Cycles > E32  Business Fluctuations ; Cycles 
Item ID:  2890 
Depositing User:  Orlando Gomes 
Date Deposited:  24. Apr 2007 
Last Modified:  18. Feb 2013 15:10 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/2890 