Stable Sunspot Equilibria in a Cash-in-Advance Economy
We develop a monetary model with flexible supply of labor, cash in advance constraints and government spending financed by seignorage. This model has two regimes. One regime is conventional with two steady states. The other regime has a unique steady state which can be determinate or indeterminate. In the latter case there exist sunspot equilibria which are stable under adaptive learning, taking the form of noisy finite state Markov processes at resonant frequencies. For a range of parameter values, a sufficient reduction in government purchases will eliminate these equilibria.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
More information through EDIRC
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.:
- Evans, Geroge W & Honkapohja, Seppo & Romer, Paul, 1998.
American Economic Review,
American Economic Association, vol. 88(3), pages 495-515, June.
- Marimon, R. & Spear, S. & Sunder, S., 1991.
"Expectationally-Driven Market Volatility: An Experimental Study,"
GSIA Working Papers
1991-3, Carnegie Mellon University, Tepper School of Business.
- Marimon Ramon & Spear Stephen E. & Sunder Shyam, 1993. "Expectationally Driven Market Volatility: An Experimental Study," Journal of Economic Theory, Elsevier, vol. 61(1), pages 74-103, October.
- Ramon Marimon & Stephen E. Spear & Shyam Sunder, 1992. "Expectationally-driven market volatility: an experimental study," Discussion Paper / Institute for Empirical Macroeconomics 73, Federal Reserve Bank of Minneapolis.
- Ramon Marimon & Stephen E. Spear & Shyam Sunder, 1993. "Expectationally-driven market volatility: An experimental study," Economics Working Papers 21, Department of Economics and Business, Universitat Pompeu Fabra.
- Woodford, Michael, 1990.
"Learning to Believe in Sunspots,"
Econometric Society, vol. 58(2), pages 277-307, March.
- Evans, George W., 1989. "The fragility of sunspots and bubbles," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 297-317, March.
- George W. Evans & Seppo Honkapohja, 2001. "Expectational Stability of Resonant Frequency Sunspot Equilibria," CESifo Working Paper Series 497, CESifo Group Munich.
- George W. Evans & Seppo Honkapohja, 2002.
"Existence of Adaptively Stable Sunspot Equilibria near an Indeterminate Steady State,"
University of Oregon Economics Department Working Papers
2002-9, University of Oregon Economics Department, revised 06 Apr 2002.
- Evans, George W. & Honkapohja, Seppo, 2003. "Existence of adaptively stable sunspot equilibria near an indeterminate steady state," Journal of Economic Theory, Elsevier, vol. 111(1), pages 125-134, July.
- 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.
- Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, vol. 64(1), pages 142-161, October.
- 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,"
Econometric Society, vol. 60(5), pages 1097-126, September.
- Chiappori, P.A. & Geoffard, P.Y. & Guesnerie, R., 1990. "Sunspot Fluctuations around a Steady State: The Case of Multidimensional One-Step forward Looking Economic Models," DELTA Working Papers 90-02, DELTA (Ecole normale supérieure).
- Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
- Bray, Margaret M & Savin, Nathan E, 1986. "Rational Expectations Equilibria, Learning, and Model Specification," Econometrica, Econometric Society, vol. 54(5), pages 1129-60, September.
- Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-11, July.
- Evans George W & McGough Bruce, 2005.
"Indeterminacy and the Stability Puzzle in Non-Convex Economies,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 5(1), pages 1-46, September.
- George W. Evans & Bruce McGough, 2002. "Indeterminacy and the Stability Puzzle in Non-Convex Economies," University of Oregon Economics Department Working Papers 2002-14, University of Oregon Economics Department, revised 27 Aug 2005.
- Duffy John, 1994. "On Learning and the Nonuniqueness of Equilibrium in an Overlapping Generations Model with Fiat Money," Journal of Economic Theory, Elsevier, vol. 64(2), pages 541-553, December.
- Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_611. 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: (Julio Saavedra)
If references are entirely missing, you can add them using this form.