Consider the following New Keynesian DSGE Model with standard notation:

$\pi_t = \kappa y_t + \gamma_f \mathbb{E}_t[\pi_{t+1}] + \gamma_b \pi_{t-1},$

$y_t = \mathbb{E}_t[y_{t+1}] - \frac{1}{\sigma}(i_t - \mathbb{E}_t[\pi_{t+1}] - r_t^n),$

$i_t = \rho + \phi_{\pi}\pi_t + \phi_y y_t + v_t.$

How would one go about deriving sufficient conditions for the existence of a unique non-explosive equilibrium under rational expectations? I'm familiar with a method for doing this when $\gamma_b=0$ (such that the Phillips curve is non-hybrid), but I have been unable to find any litterature on the case of a hybrid Phiilips curve.

Any input is appreciated very much, thanks!


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.