Timing and real indeterminacy in monetary models
AbstractAn increasingly common approach to the theoretical analysis of monetary policy ensures that a proposed policy does not introduce real indeterminacyâand thus sunspot fluctuationsâinto the model economy. Policy is typically conducted in terms of directives for the nominal interest rate. This paper uses a discrete-time, money-in-the-utility function model to demonstrate how seemingly minor modifications in the trading environment result in dramatic differences in the policy restrictions needed to ensure real determinacy. These differences arise because of the differing pricing equations for the nominal interest rate.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 47 (2001)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/inca/505566
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