Endogenous growth and the Taylor principle

Abstract

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Innovation, Growth, and Optimal Monetary Policy

“…In the two models we consider in this paper by decreasing the degree of stickiness in the final good sector by 10%, the equilibrium is determined for ι Y > 1 in the exogenous growth model, and for ι Y > 1.05 in the endogenous growth model. This last result is consistent with Micheli (2018) who shows that under endogenous growth the region of determinacy is restricted.…”

“…spending, as shown by Carlstrom and Fuerst (2005) and by an endogenous growth mechanism, as shown by Micheli (2018). 33 We observe that with endogenous innovation the optimal operational monetary rule prescribes a strong response to inflation, high persistence, but no reaction to output growth.…”

Can Growth Stabilize Debt? A Fiscal Theory Perspective

“…Our approach to incorporating endogenous growth via expanding varieties through R&D as in Romer (1990) into a simple New Keynesian environment is closely related to the approach taken by Queralt ó (2022), who studies optimal monetary policy in a model without public debt. Garga and Singh (2021) study optimal monetary policy in a New Keynesian DSGE model with Schumpeterian growth through R&D. Estimated, medium-scale DSGE models with endogenous growth through innovation investment include Moran and Queralto (2018), Anzoategui et al (2019), Bianchi et al (2019), Ikeda and Kurozumi (2019), and Elfsbacka Schm öller and Spitzer (2021) and key insights include the effect of demand and monetary policy shocks 2 In models without public debt, the Taylor Principle may not be sufficient for determinacy if capital and investment are present (Carlstrom and Fuerst (2005)), or under an ad hoc learning-by-doing mechanism (Micheli (2018)), or in a HANK model with counter-cyclical income risk (Acharya and Dogra (2020), Bilbiie (2021)). The Taylor Principle may not be necessary for determinacy if agents are myopic (Gabaix (2020)), have finite planning horizons (Woodford and Xie (2022)), social memory frictions ), imperfect common knowledge (Angeletos and Lian (2018)), face a cost channel (Beaudry et al (2024)), or in a HANK setting with pro-cyclical income risk (Acharya and Dogra (2020)).…”

Price Stability and Debt Sustainability under Endogenous Trend Growth

“…Our approach to incorporating endogenous growth via expanding varieties through R&D as in Romer (1990) into a simple New Keynesian environment is closely related to the approach taken by Queralt ó (2022), who studies optimal monetary policy in a model without public debt. Garga and Singh (2021) study optimal monetary policy in a New Keynesian DSGE model with Schumpeterian growth through R&D. Estimated, medium-scale DSGE models with endogenous growth through innovation investment include Moran and Queralto (2018), Anzoategui et al (2019), Bianchi et al (2019), Ikeda and Kurozumi (2019), and Elfsbacka Schm öller and Spitzer (2021) and key insights include the effect of demand and monetary policy shocks 2 In models without public debt, the Taylor Principle may not be sufficient for determinacy if capital and investment are present (Carlstrom and Fuerst (2005)), or under an ad hoc learning-by-doing mechanism (Micheli (2018)), or in a HANK model with counter-cyclical income risk (Acharya and Dogra (2020), Bilbiie (2021)). The Taylor Principle may not be necessary for determinacy if agents are myopic (Gabaix (2020)), have finite planning horizons (Woodford and Xie (2022)), social memory frictions ), imperfect common knowledge (Angeletos and Lian (2018)), face a cost channel (Beaudry et al (2024)), or in a HANK setting with pro-cyclical income risk (Acharya and Dogra (2020)).…”