Active monetary policy and instability in a phillips curve system
Review articleOpen access
1998/09/01 Full-length article DOI: 10.1016/S0164-0704(98)00087-1
Journal: Journal of Macroeconomics
The presence of nonlinearities in a Phillips curve system yields to complex dynamics, i.e., cyclical behavior that may (under some parametric set) become chaotic. This paper extends these conclusions by including an active monetary policy. We show how stabilization policy may lead to amplified instabilities and that agents' expectations tend to play a key role in the amount of these instabilities.
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