Hopf bifurcation in the Clarida, Gali, and Gertler model

William Barnett and Unal Eryilmaz

MPRA Paper from University Library of Munich, Germany

Abstract: We explore bifurcation phenomena in the open-economy New Keynesian model developed by Clarida, Gali and Gertler (2002). We find that the open economy framework can bring about more complex dynamics, along with a wider variety of qualitative behaviors and policy responses. Introducing parameters related to the open economy structure affects the values of bifurcation parameters and changes the location of bifurcation boundaries. As a result, the stratification of the confidence region, as previously seen in closed-economy New Keynesian models, remains an important research and policy risk to be considered in the context of the open-economy New Keynesian functional structures. In fact, econometrics and optimal policy design become more complex within an open economy. Dynamical inferences need to be qualified by the risk of bifurcation boundaries crossing the confidence regions. Without adequate prior econometric research, policy design needs to take into consideration that a change in monetary policy can produce an unanticipated bifurcation.

Keywords: stability; bifurcation; open economy; New Keynesian; macroeconomics; dynamic systems (search for similar items in EconPapers)
JEL-codes: C52 C61 C62 E32 E37 E61 F41 (search for similar items in EconPapers)
Date: 2012-08-13
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Hopf bifurcation in the Clarida, Gali, and Gertler model (2013)
Working Paper: Hopf Bifurcation in the Clarida, Gali, and Gertler Model (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:40668

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