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redistributed across households in steady state. Inequality leads to equilibrium indeterminacy and undermines the theoretical …
Persistent link: https://www.econbiz.de/10012143748
We review some of the (theoretical) economic implications of David Schmeidler's models of decision under uncertainty (Choquet expected utility and maxmin expected utility) in competitive market settings. We start with the portfolio inertia result of Dow and Werlang (1992), show how it does or...
Persistent link: https://www.econbiz.de/10012144241
postwar US macroeconomic data can be explained as the outcome of passive monetary policy, indeterminacy, and sunspot … allowing the parameters to fall both in the determinacy and indeterminacy regions. The estimates reveal large shares of agents … results confirm that macroeconomic data in the early windows are better explained by indeterminacy, while determinacy is …
Persistent link: https://www.econbiz.de/10012207989
principle in one regime does not necessarily cause indeterminacy. Second, very different responses to inflation may trigger … indeterminacy even if both regimes satisfy the Taylor principle. Determinacy thus results from the adequacy between monetary regimes …
Persistent link: https://www.econbiz.de/10012215375
indeterminate. After opening the borders, the rigid wage country may export indeterminacy to the full employment country …, particularly if it is big enough. In contrast, when the full employment country is sufficiently big, local indeterminacy, and … fluctuations (associated with local indeterminacy and bifurcations) are possible with smaller externalities, whatever the relative …
Persistent link: https://www.econbiz.de/10012497948
We propose a novel approach to deal with the problem of indeterminacy in linear rational expectations models. The … number of explosive roots in presence of indeterminacy. The solution in this expanded state space, if it exists, is always … and any degree of indeterminacy, and it can be implemented even when the boundaries of the determinacy region are unknown …
Persistent link: https://www.econbiz.de/10013189720
This paper studies identification of linear rational expectations models under news shocks. Exploiting the general martingale difference solution approach, we show that news shocks models are observationally equivalent to a class of indeterminate equilibrium frameworks which are subject only,...
Persistent link: https://www.econbiz.de/10011496157
I give necessary and sufficient conditions under which interest-rate feedback rules eliminate aggregate instability by inducing a globally unique optimal equilibrium in a canonical New Keynesian economy with a binding zero lower bound. I consider a central bank that initially keeps interest...
Persistent link: https://www.econbiz.de/10011538006
If agents are ambiguity-averse and can invest in productive assets, asset prices can robustly exhibit indeterminacy in … the markets that open after the productive investment has been launched. For indeterminacy to occur, the aggregate supply … systematically. That indeterminacy arises only at a knife-edge set of aggregate supplies allows for a simple explanation of the …
Persistent link: https://www.econbiz.de/10011599497
This paper shows that the conditions under which inflation-targeting interest rate rules lead to equilibrium uniqueness in a small open economy in general differ from those in a closed economy. As the monetary authority adjusts nominal interest rates in response to inflation, the real interest...
Persistent link: https://www.econbiz.de/10011604219