Mathematical Formalization of Macroeconomic Stabilization Policy in a High-dimensional Dynamic Keynesian Model with Public Debt Accumulation

Abstract

In this paper, we study mathematically the effect of macroeconomic stabilization policyin a high-dimensional dynamic Keynesian model with public debt accumulation. The reduced form of our model is described by a five-dimensional system of nonlinear differentialequations. The dynamic effect of the fiscal and monetary policy mix on the macroeconomic stability, instability and cyclical fluctuations are studied both analytically and numerically.