Advanced Search
MyIDEAS: Login to save this paper or follow this series

Stable Sunspot Equilibria in a Cash-in-Advance Economy

Contents:

Author Info

  • George W. Evans
  • Seppo Honkapohja
  • Ramon Marimon

Abstract

We analyze a monetary model with flexible labor supply, cash-inadvance constraints and seigniorage-financed government deficits. If the intertemporal elasticity of substitution of labor is greater than one, there are two steady states, one determinate and the other indeterminate. If the elasticity is less than one, there is a unique steady state, which can be indeterminate. Only in the latter case do there exist sunspot equilibria that are stable under adaptive learning. A sufficient reduction in government purchases can in many cases eliminate the sunspot equilibria while raising consumption/labor taxes even enough to balance the budget may fail to achieve determinacy.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://research.barcelonagse.eu/tmp/working_papers/14.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 14.

as in new window
Length:
Date of creation: Dec 2003
Date of revision:
Handle: RePEc:bge:wpaper:14

Contact details of provider:
Postal: Ramon Trias Fargas, 25-27, 08005 Barcelona
Phone: +34 93 542-1222
Fax: +34 93 542-1223
Email:
Web page: http://www.barcelonagse.eu
More information through EDIRC

Related research

Keywords: Indeterminacy; learnability; expectational stability; endogenous fluctuations; seigniorage;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 193-227, April.
  2. George Evans & Seppo Honkapohja & Paul Romer, 1996. "Growth Cycles," NBER Working Papers 5659, National Bureau of Economic Research, Inc.
  3. George W. Evans & Seppo Honkapohja, 2001. "Existence of Adaptively Stable Sunspot Equilibria Near an Indeterminate Steady State," CESifo Working Paper Series 478, CESifo Group Munich.
  4. Bray, Margaret M & Savin, Nathan E, 1986. "Rational Expectations Equilibria, Learning, and Model Specification," Econometrica, Econometric Society, Econometric Society, vol. 54(5), pages 1129-60, September.
  5. Ramon Marimon & Stephen E. Spear & Shyam Sunder, 1993. "Expectationally-driven market volatility: An experimental study," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 21, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Barnett,William A. & Geweke,John & Shell,Karl (ed.), 1989. "Economic Complexity: Chaos, Sunspots, Bubbles, and Nonlinearity," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521355636.
  7. Chiappori, Pierre-Andre & Geoffard, Pierre-Yves & Guesnerie, Roger, 1992. "Sunspot Fluctuations around a Steady State: The Case of Multidimensional, One-Step Forward Looking Economic Models," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1097-126, September.
  8. Woodford, Michael, 1986. "Learning to Believe in Sunspots," Working Papers, C.V. Starr Center for Applied Economics, New York University 86-16, C.V. Starr Center for Applied Economics, New York University.
  9. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, Econometric Society, vol. 48(5), pages 1305-11, July.
  10. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, Elsevier, vol. 64(1), pages 142-161, October.
  11. George W. Evans & Seppo Honkapohja, 2001. "Expectational Stability of Resonant Frequency Sunspot Equilibria," CESifo Working Paper Series 497, CESifo Group Munich.
  12. George W. Evans & Bruce McGough, 2002. "Indeterminacy and the Stability Puzzle in Non-Convex Economies," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2002-14, University of Oregon Economics Department, revised 27 Aug 2005.
  13. Duffy John, 1994. "On Learning and the Nonuniqueness of Equilibrium in an Overlapping Generations Model with Fiat Money," Journal of Economic Theory, Elsevier, Elsevier, vol. 64(2), pages 541-553, December.
  14. Evans, George W., 1989. "The fragility of sunspots and bubbles," Journal of Monetary Economics, Elsevier, Elsevier, vol. 23(2), pages 297-317, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Pedro Mazeda Gil, 2010. "Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model with Transition," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c015_040, DEGIT, Dynamics, Economic Growth, and International Trade.
  2. Evans, George W. & McGough, Bruce, 2005. "Monetary policy, indeterminacy and learning," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 29(11), pages 1809-1840, November.
  3. George W. Evans & Seppo Honkapohja, 2008. "Expectations, Learning, And Monetary Policy: An Overview Of Recent Research," Working Papers Central Bank of Chile, Central Bank of Chile 501, Central Bank of Chile.
  4. Seonghoon Cho & Antonio Moreno, 2006. "Expectational Stability in Multivariate Models," Faculty Working Papers, School of Economics and Business Administration, University of Navarra 06/08, School of Economics and Business Administration, University of Navarra.
  5. Dixon, Huw David & Pourpourides, Panayiotis M., 2012. "On Imperfect Competition with Occasionally Binding Cash-in-Advance Constraints," Cardiff Economics Working Papers, Cardiff University, Cardiff Business School, Economics Section E2012/3, Cardiff University, Cardiff Business School, Economics Section.
  6. Evans, George & Honkapohja, Seppo, 2008. "Expectations, Learning and Monetary Policy: An Overview of Recent Research," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2008-03, Scottish Institute for Research in Economics (SIRE).
  7. George W. Evans & Seppo Honkapohja, 2002. "Existence of Adaptively Stable Sunspot Equilibria near an Indeterminate Steady State," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2002-9, University of Oregon Economics Department, revised 06 Apr 2002.
  8. Stefano Eusepi, 2005. "Comparing forecast-based and backward-looking Taylor rules: a "global" analysis," Staff Reports, Federal Reserve Bank of New York 198, Federal Reserve Bank of New York.
  9. Pedro Rui Mazeda Gil, 2009. "Animal Spirits and the Composition of Innovation in a Lab-Equipment R&D Model," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 336, Universidade do Porto, Faculdade de Economia do Porto.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.