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Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy

Abstract : This paper compares different implementations of monetary policy in a new- Keynesian setting. We can show that a shift from Ramsey optimal policy under short term commitment (based on a negative-feed back mechanism) to a Taylor rule (based on a positive-feed back mechanism) corresponds to a Hopfbifurcation with opposite policy advice and a change of the dynamic properties. This bifurcation occurs because of the ad hoc assumption that interest rate is a forward-looking variable when policy targets (inflation and out put gap) a reforward-looking variables in the new-Keynesian theory.
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Submitted on : Wednesday, February 19, 2020 - 12:17:08 PM
Last modification on : Friday, April 29, 2022 - 10:13:22 AM
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Jean-Bernard Chatelain, Kirsten Ralf. Hopf Bifurcation from New-Keynesian Taylor Rule to Ramsey Optimal Policy. 2020. ⟨halshs-01549929v3⟩



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