Optimal control in the New Keynesian model with monetary and fiscal policy interactions

Journal of Physics: Conference Series. 2021. Vol. 1864. Article 012040.

Alexeeva T.A., Kuznetsov N. V., Mokaev T. N., I. A. Polshchikova

Dynamics of the New Keynesian model in continuous time with the Rotemberg pricing mechanism is considered within a framework of an optimal control problem. Various regimes of monetary and fiscal policy ('active' and 'passive') can lead to unstable dynamics in the economy. Parameters of the Taylor rules for both monetary and fiscal policies determine conditions for local equilibrium determinacy. Mapping out the ranges of the Taylor coefficient values where local determinacy cannot be obtained allows to control the economic system by controlling these parameters

Ключевые слова: нелинейная динамика, nonlinear dynamics, global indeterminacy, local equilibrium determinacy, локальная неопределенность равновесия, глобальная неопределенность равновесия, оптимальное управление динамическими системами, фискальная и монетарная политика, Scal and monetary policies' interaction