Analysis of a Non-Linear Model of Monetary Dynamics
(1982) , 25 pages
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- Abstract
- (en) It is a well established result that descriptive dynamic macroeconomic models can exhibit dynamic instability. In this paper we shall be particularly concerned with the dynamic instability as it arises in models of monetary dynamics. Such instability was first observed in the model developed by Cagan (1956). In this model the money market cleared instantaneously and inflationary expectations adjusted adaptively to the actual rate of inflation. For relatively high speeds of adjustment the model exhibits instability. More general models allowing in addition for monetary market disequilibrium such as those developed by Goldman (1972) and Hadji michalakis (1971) and allowing for capital accumulation as in Sidsauski (1967), Shell et al (1969), Nagatani (1970) and Hadjimichalakis (1971) con~ tinue to exhibit the same basic dynamic instability property, Yarrow (1977) showed that the stability properties of such models are also sensitive to the specification of the money demand function.
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Citations
Chiarella, C. (1982). Analysis of a Non-Linear Model of Monetary Dynamics (Working Papers Institut des sciences économiques 8207). https://hdl.handle.net/2078.5/278954