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This paper is concerned with the saddle-path stability of monetary growth rules in a two-country two-sector dynamic stochastic general equilibrium model. Alongside standard features of emerging economies, such as a combination of producer and local currency pricing for exports, fiscal dominance and oil exports, this model also incorporates informal labour and production sectors and examines how these features matter in the context of monetary policy in emerging economies.We estimate the model on Iran and US data for home and foreign block respectively using Bayesian estimation techniques. Under a benchmark instruments of monetary policy, we show that a Taylor-type money growth rule rather than interest rate, even up to a four period ahead forward-looking has complete stability and determinacy properties in the economy which is also hold regardless of the level of asset market participation, therefore the inverted Taylor principles does not apply in our economy.Our findings confirm the important propagation channels which are active in the emerging economies and taking into account these features is essential for any policy-related study, such as the stabilizer effect of terms of trade between formal and informal sector, buffer behaviour of informal sector which is dampened in the model of higher informal frictions, disturbance effects of credit constrained household on the business cycle fluctuations and finally, monetary policy shock which is less effective in an environment of high share of informal sector, low informal frictions, high share of limited asset market participations and a trade autarky economy.

In a closed economy setting a cash-in-advance monetary economy under money growth targeting is prone to self-fulfilling expectations and beliefs-driven fluctuations. This paper shows that such extrinsic instability is less of a problem in a small open economy integrated in the world goods and financial markets. This is because endogenous terms-of-trade movements associated with global goods trade and cross-border capital flows and endogenous international asset price adjustments associated with global financial transaction serve as an endogenous stabilizer to reduce the likelihood of sunspot equilibria. We find that for empirically reasonable parametrization of the small open economy sunspot beliefs are unlikely to become self-fulfilled. [ABSTRACT FROM AUTHOR]

I will study a multi-sector endogenous growth model with general constant returns to scale technologies and demonstrate the existence, uniqueness and the saddle-path stability of the balanced growth equilibrium. I will first demonstrate the existence of a balanced growth equilibrium, by showing that the balanced growth rate associated with the balanced growth equilibrium is solely determined by solving a Frobenius root problem of the price equations derived from the Euler equations and the property of the nonsubstitution theorem. Then I will show the saddle-path stability of the balanced growth equilibrium without any capital intensity conditions, which is a generalized property proved in the two-sector endogenous growth models by de Guevara et al. (J Econ Dyn Control 21, 115–143, 1997), Bond et al. (J Econ Theory 68, 149–173 1996) and Mino (Int Eco Rev 37, 227–251 1996). The theorem clearly implies that the balanced growth equilibrium has a transition path in the neighborhood of the balanced growth equilibrium. [ABSTRACT FROM AUTHOR]

This paper analyses the local stability of the steady slate of the generalized Lai (1995) model, i.e. the Shimizu and Okamoto (2004) model. Lai is a modified version of Grossman and Helpman (1991a, 1991b: Ch. 11) by assuming that there are two types of labour: skilled and unskilled labours. Shimizu and Okamoto (2004) generalize the Lai model by assuming that Southern knowledge stock depends not only on Southern cumulative experience but also on the number of products the North manufactures. This paper shows that the stability of steady state in the generalized Lai model has (he saddle point properly. Thus, this paper also establishes the stability of the Grossman and Helpman (1991a, 199lb: Ch. 11) model. [ABSTRACT FROM AUTHOR]