Price indexation, habit formation, and the Generalized Taylor Principle

Saroj Bhattarai, Jae Won Lee, Woong Yong Park

Research output: Contribution to journalArticlepeer-review


We prove that the Generalized Taylor Principle, under which the nominal interest rate reacts more than one-for-one to a change in inflation in the long run, is a necessary and (under some extra mild restrictions on parameters) sufficient condition for determinacy in a sticky price model with interest rate smoothing in monetary policy, partial dynamic price indexation, and habit formation in consumption.

Original languageEnglish (US)
Pages (from-to)218-225
Number of pages8
JournalJournal of Economic Dynamics and Control
StatePublished - Nov 1 2014
Externally publishedYes


  • Determinacy
  • Generalized Taylor Principle
  • Habit formation
  • Price indexation
  • Sticky prices

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


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