We study whether monetary economies display nominal indeterminacy: equivalently, whether monetary policy determines the path of prices under uncertainty. In a simple, stochastic, cash-in-advance economy, we find that indeterminacy arises and is characterized by the initial price level and a...

We study whether monetary economies display nominal indeterminacy: equivalently, whether monetary policy determines the path of prices under uncertainty. In a simple, stochastic, cash-in-advance economy, we find that indeterminacy arises and is characterized by the initial price level and a...

The failure of the asset market to be complete causes serial dependence in output and prices, which is suboptimal. The authors consider an economy with white noise shocks. When the asset market is complete, an optimal, competitive allocation inherits this strong stationarity. When the asset...