Indeterminacy of Equilibrium and the Roles of Fiscal and Monetary Policies

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This research focuses on the role of fiscal and monetary policies in the economies with multiple equilibria. We have first investigated the effects of policy changes in the presence of equilibrium indeterminacy. In particular, we examine whether or not counter intuitive policy effects emerge when there are multiple converging equilibria It is shown that the results depend heavily upon the specifications of production technology and preference structure. We have revealed this fact in alternative monetary growth models as well as in models with distortionary income taxation. In dealing with monetary growth models, we consider both the constant money growth rule and the interest rate control rule. In the models with fiscal policies, we have examined various effects of capital-income tax, wage-income tax as well as consumption tax.The second purpose of our research is to consider the relationship between policy impacts and indeterminacy of equilibrium in the models that are more general than the standard analytical frameworks used in the literature. In so doing, we have studied (1) a growth model with environmental (negative) externalities, (2) an overlapping generation model with endogenous occupational choice, (3) a model of endogenous technical change with knowledge diffusion, and (4) a growth model with R&D investment and taxation. By examining these specific models, we have found various policy implications in the presence of equilibrium indeterminacy.