This paper examines the impact monetary redistribution policies have on the amount of sunspot-induced volatility in an … economy. A dynamic model of segmented asset markets is presented in which the tax-transfer policy determines, in a continuous … way, the influence sunspots can have on the general price level and on consumption. If the policy leads to a transfer of …

segmentation is introduced in which this tax policy determines how volatile the price level can be, which in turn determines the … volatility of consumption. The paper characterizes (i) the set of general price levels consistent with the existence of … volatility that a particular policy may induce …