A new Keynesian model with delay: Monetary policy lag and determinacy of equilibrium

We investigate the effects of a monetary policy lag on equilibrium determinacy by using a New Keynesian (NK) continuous-time framework. If the lag is not very large, the result obtained will not be different from the standard one: an active monetary policy attains local equilibrium determinacy, which is a policy norm known as the Taylor principle. However, if the lag is sufficiently large, then no equilibrium will exist.