Sticky Prices and Indeterminacy

The aim of the present paper is to analyze the link between price rigidity and indeterminacy. This is done within a cash-in-advance economy from which we know that it exhibits indeterminacy at high degrees of relative risk aversion. I find that price stickiness reduces the scope of these sunspot equilibria; sluggish price adjustment requires degrees of relative risk aversion compatible with indeterminacy that prove too high to square with data.

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Year of publication:	2006
Authors:	Weder, Mark
Institutions:	School of Economics, University of Adelaide
Subject:	cash-in-advance economies \| Calvo-pricing \| sunspot equilibria

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Extent:	application/pdf
Series:	School of Economics Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2006-02 15 pages
Classification:	E31 - Price Level; Inflation; Deflation ; E32 - Business Fluctuations; Cycles
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008568467