American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Generalizing the Taylor Principle: Comment
American Economic Review
vol. 100,
no. 1, March 2010
(pp. 608–17)
Abstract
Troy Davig and Eric Leeper (2007) have proposed a condition they call the generalized Taylor principle to rule out indeterminate equilibria in a version of the new-Keynesian model where the parameters of the policy rule follow a Markov-switching process. We show that although their condition rules out a subset of indeterminate equilibria, it does not establish uniqueness of the fundamental equilibrium. We discuss the differences between indeterminate fundamental equilibria included by Davig and Leeper's condition and fundamental equilibria that their condition misses. (E12, E31, E43, E52)Citation
Farmer, Roger E. A., Daniel F. Waggoner, and Tao Zha. 2010. "Generalizing the Taylor Principle: Comment." American Economic Review, 100 (1): 608–17. DOI: 10.1257/aer.100.1.608JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E31 Price Level; Inflation; Deflation
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy