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Imaginary money against sticky relative prices

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  • Eduardo Loyo

    (Department of Economics PUC-Rio)

Abstract

This 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.

Suggested Citation

  • Eduardo Loyo, 2001. "Imaginary money against sticky relative prices," Textos para discussão 448, Department of Economics PUC-Rio (Brazil).
    • Handle: RePEc:rio:texdis:448
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    References listed on IDEAS

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    Cited by:

    1. Marcelo de Paiva Abreu, 2003. "The political economy of economic integration in the Americas: Latin American interests," Textos para discussão 468, Department of Economics PUC-Rio (Brazil).

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    More about this item

    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

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