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Sticky Prices and Indeterminacy Author info | Abstract | Publisher info | Download info | Related research | Statistics MARK WEDER
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The aim of this paper is to analyze the link between price rigidity and indeterminacy. This is done within a cash-in-advance economy that is known to exhibit indeterminacy at high degrees of relative risk aversion. My findings show that price stickiness reduces the scope of these sunspot equilibria: to be compatible with indeterminacy, sluggish price adjustment requires degrees of relative risk aversion that prove too high to square with data. Copyright (c) 2008 The Ohio State University.
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking .
Volume (Year): 40 (2008)
Issue (Month): 5 (08)
Pages: 1073-1082
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Handle: RePEc:mcb:jmoncb:v:40:y:2008:i:5:p:1073-1082Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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Kevin X.D. Huang & Qinglai Meng, 2007.
"Is Forward-Looking Inflation Targeting Destabilizing? The Role of Policy's Response to Current Output under Endogenous Investment ,"
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0704, Department of Economics, Vanderbilt University.
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