High degrees of relative risk aversion induce indeterminacy in cashin- advance economies. This paper finds that Taylor-style policies can preempt such sunspot equilibria. Specific policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coefficient of relative risk aversion.
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Article provided by De Boeck Université in its journal Recherches économiques de Louvain.
Volume (Year): 72 (2006)
Issue (Month): 2 ()
Pages: 195-204
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- Weder, Mark, 2006.
"Sticky Prices and Indeterminacy,"
CEPR Discussion Papers
5535, C.E.P.R. Discussion Papers.
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Other versions:
- Mark Weder, 2006.
" Sticky Prices and Indeterminacy,"
CDMA Working Paper Series
0601, Centre for Dynamic Macroeconomic Analysis.
[Downloadable!]
- Mark Weder, 2008.
"Sticky Prices and Indeterminacy,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 40(5), pages 1073-1082, 08.
[Downloadable!] (restricted)
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