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This paper examines optimal monetary policy under heterogeneous expectations. To this end, we develop a stochastic New Keynesian model with a cost-push shock and coexistence of one-step-ahead rational and adaptive expectations in decentralized markets. On the one side, heterogeneous expectations...
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This paper develops a theory of endogenously (non-)Ricardian beliefs. That is, whether Ricardian Equivalence holds in ….) multiple equilibria exist where the economy can coordinate on Ricardian or non-Ricardian equilibria. The theory suggests a …
Persistent link: https://www.econbiz.de/10011988962
We develop a New Keynesian (NK) model with endogenous price setting frequency. Whether a firm updates its price in a given period depends on an analysis of expected cost and benefits modelled by a discrete choice process. A firm decides to update the price when expected benefits outweigh...
Persistent link: https://www.econbiz.de/10012197700