Chatelain, JeanBernard and Ralf, Kirsten (2017): Hopf Bifurcation from newKeynesian Taylor rule to Ramsey Optimal Policy.
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Abstract
This paper shows that a shift from Ramsey optimal policy under short term commitment (based on a negativefeedback mechanism) to a Taylor rule (based on positivefeedback mechanism) in the newKeynesian model is in fact a Hopf bifurcation, with opposite policy advice. The number of stable eigenvalues corresponds to the number of predetermined variables including the interest rate and its lag as policy instruments for Ramsey optimal policy. With a newKeynesian Taylor rule, however, these policy instruments are arbitrarily assumed to be forwardlooking variables when policy targets (inflation and output gap) are forwardlooking variables. For newKeynesian Taylor rule, this Hopf bifurcation implies a lack of robustness and multiple equilibria if public debt is not set to zero for all observation.
Item Type:  MPRA Paper 

Original Title:  Hopf Bifurcation from newKeynesian Taylor rule to Ramsey Optimal Policy 
Language:  English 
Keywords:  Bifurcations, Taylor rule, Taylor principle, newKeynesian model, Ramsey optimal policy, Finite horizon commitment 
Subjects:  C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis 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 > E4  Money and Interest Rates > E43  Interest Rates: Determination, Term Structure, and Effects E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E44  Financial Markets and the Macroeconomy E  Macroeconomics and Monetary Economics > E4  Money and Interest Rates > E47  Forecasting and Simulation: Models and Applications 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 > E5  Monetary Policy, Central Banking, and the Supply of Money and Credit > E58  Central Banks and Their Policies 
Item ID:  81421 
Depositing User:  JeanBernard Chatelain 
Date Deposited:  17 Sep 2017 14:14 
Last Modified:  17 Sep 2017 14:16 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/81421 
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Hopf Bifurcation from newKeynesian Taylor rule to Ramsey Optimal Policy. (deposited 21 May 2017 06:15)
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