Technological change and monetary policy in a sticky-price model

We developed a sticky-price model that introduces the factors of (a) the non-separability of consumption and labor in the utility function and (b) a technological change induced by the investment of profits, to analyze the determinacy of equilibrium. We found that while engaging in inflation targeting increases the probability of determinacy, engaging in share-price targeting decreases the probability of determinacy in a standard sticky-price model; engaging in both inflation targeting and share-price targeting can increase the probability of determinacy in our model.

Research highlights
► We develop a sticky-price model that introduced the non-separability of the utility function and the technological change.
► We examine the determinacy of equilibrium.
► If consumption and labor are non-separable, share-price targeting can be a factor in determinacy.