Sticky Prices and Indeterminacy
The aim of the present paper is to analyze the link between price rigidity and indeterminacy. This is done within a cash-in-advance economy from which we know that it exhibits indeterminacy at high degrees of relative risk aversion. I find that price stickiness reduces the scope of these sunspot equilibria; sluggish price adjustment requires degrees of relative risk aversion compatible with indeterminacy that prove too high to square with data.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: Adelaide SA 5005|
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Web page: http://www.economics.adelaide.edu.au/
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