Article ID Journal Published Year Pages File Type
984474 Research in Economics 2011 15 Pages PDF
Abstract

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.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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