Economics, Econometrics and Finance
3 years ago

Unstable dynamics in economy controlled by monetary and fiscal policy parameters.

Journal of Physics Conference Series
Optimal control in the New Keynesian model with monetary and fiscal policy interactions
Tatyana A. Alexeeva, Н. В. Кузнецов, T. N. Mokaev, I.A. Polshchikova

Paper Summary

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The article explores how different monetary and fiscal policies can affect the stability of the economy in a New Keynesian model. By adjusting the parameters of the Taylor rules for these policies, it is possible to control the economic system and prevent unstable dynamics. The researchers found that certain ranges of values for these parameters can lead to unstable equilibrium, highlighting the importance of carefully managing monetary and fiscal policies for a stable economy.