Dynamic Keynesian Models of Monetary and Fiscal Stabilization Policies

Abstract

  In this paper, we summarize a series of dynamic Keynesian models of monetary and fiscal stabilization policies that were presented in our previous works. All models are formulated by systems of nonlinear differential equations. We take up three models sequentially. The first model is the simplest two-dimensional model of monetary stabilization policy without debt effects. The second model is more complicated four-dimensional model of monetary stabilization policy with private debt effect. The third model is the most general six-dimensional model of monetary and fiscal stabilization policy mix with twin (private and public) debt effects. These models produce various types of dynamic behaviors (stable, unstable, and cyclical behaviors) according to the crucial parameter values.