Imaginary money against sticky relative prices
AbstractThis paper considers price setting in pure units of account, linked to the means of payment through managed parities. If prices are sticky in the units in which they are set, parity changes may facilitate equilibrium adjustment of relative prices. The paper derives simultaneously the optimal choice of unit of account by each price setter, and the optimal parity policy. The gains from having multiple units of account are computed for a simple calibrated economy.
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Bibliographic InfoPaper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number 448.
Length: 22 pages
Date of creation: Oct 2001
Date of revision:
Publication status: Published in European Economic Review v. 46, p. 1073-1092, 2002
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Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-11-21 (All new papers)
- NEP-CBA-2001-11-21 (Central Banking)
- NEP-MAC-2001-10-29 (Macroeconomics)
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