Sticky Prices and Indeterminacy
نویسنده
چکیده
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 Þnd 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. ∗I would like to thank Raul Barreto and Thomas Lubik for very useful comments.
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