Interest rate rules and macroeconomic stabilization
High degrees of relative risk aversion induce indeterminacy in cashin- advance economies. This paper finds that Taylor-style policies can preempt such sunspot equilibria. Specific policy recommendations depend on the fundamentals of the economy, i.e. the empirically true value of coefficient of relative risk aversion.
Volume (Year): 72 (2006)
Issue (Month): 2 ()
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