The Role of Monetary Policy in Eliminating Nonconvergent Dynamic Paths
AbstractThis paper investigates the effects of money growth on nonconvergent dynamic paths in a money-in-utility model. When relative risk aversion is decreasing in money, period-two cycle and sunspot equilibria are always associated with a high rate of money supply growth. However, when relative risk aversion is increasing in money, it is ambiguous whether they are associated with either high or low rate of money supply growth. The paper also investigates the same problem in a transaction cost model. The author shows that the results essentially depend on the form of the transaction cost function. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 38 (1997)
Issue (Month): 1 (February)
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Web page: http://www.econ.upenn.edu/ier
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- Guo, Jang-Ting & Lansing, Kevin J., 2002.
"Fiscal Policy, Increasing Returns, And Endogenous Fluctuations,"
Cambridge University Press, vol. 6(05), pages 633-664, November.
- Jang-Ting Guo & Kevin Lansing, 1999. "Fiscal policy, increasing returns, and endogenous fluctuations," Working Papers in Applied Economic Theory 99-08, Federal Reserve Bank of San Francisco.
- Fukuda, Shin-ichi, 2004.
"Extraneous shocks and international linkage of business cycles in a two-country monetary model,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 54(3), pages 389-409, July.
- Shin-ichi Fukuda, 1998. "Extraneous Shocks and International Linkage of Business Cycles in a Two-Country Monetary Model," CIRJE F-Series CIRJE-F-16, CIRJE, Faculty of Economics, University of Tokyo.
- Fukuda, Shin-ichi, 1998. "Sunspot equilibria and periodic cycles under idiosyncratic uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 127-138, July.
- Marco Airaudo & Luis-Felipe Zanna, 2005. "Interest rate rules, endogenous cycles, and chaotic dynamics in open economies," International Finance Discussion Papers 849, Board of Governors of the Federal Reserve System (U.S.).
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