Survey_EM_2003

Abstract

We follow (Bullard and Mitra 2002) and (Honkapohja and Mitra 2001) by specifying a simple New Keynesian IS-AS model, except that, for added generality, as in (Galí and Gertler 1999) and much applied work, we allow for some dependence on lagged inflation in the Phillips curve. We close the model with a variety of interest rate rules: like Bullard and Mitra, we consider rules depending on current, lagged, and expected inflation, and like Honkapohja and Mitra, we also consider rules depending on lagged nominal interest rates. For each model we consider three calibrations of the IS-AS structure, as well as some alternative parameter values. Analytic results are, in general, unavailable, and so we test stability numerically by considering, for each calibration, a lattice over the space of policy parameters. At each point in the lattice, indeterminacy and stability of the corresponding equilibria are examined.