Article
Licensed
Unlicensed
Requires Authentication
Stable Sunspot Equilibria in a Cash-in-Advance Economy
-
George W Evans
Published/Copyright:
January 22, 2007
We analyze a monetary model with flexible labor supply, cash-in-advance constraints, and seigniorage- and tax-financed government spending. If the intertemporal elasticity of substitution of labor is greater than one, both determinate and indeterminate steady states exist. If the elasticity is less than one, there is a unique steady state, which can be indeterminate. Only in the latter case do there exist sunspot equilibria that are stable under adaptive learning. A sufficient reduction in government purchases or increase in tax rates eliminates the sunspot equilibria in many cases. However, raising taxes enough to balance the budget can fail to achieve determinacy.
Keywords: indeterminacy; learnability; expectational stability; seigniorage; endogenous fluctuations
Published Online: 2007-1-22
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
You are currently not able to access this content.
You are currently not able to access this content.
Articles in the same Issue
- Topics Article
- To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
- Economic Growth: A Channel Decomposition Exercise
- Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
- Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
- A Simple Wicksellian Macroeconomic Model
- Confidence-Enhanced Economic Growth
- A Positive Analysis of Targeted Employment Protection Legislation
- The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
- Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
- Does Permanent Income Determine the Vote?
- Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
- Savers, Spenders and Fiscal Policy in a Small Open Economy
- Assessing Sign Restrictions
- Euro Area Inflation Differentials
- Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
- Gold, Fiat Money, and Price Stability
- Housing Tenure and Wealth Distribution in Life Cycle Economies
- Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
- Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
- Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
- Contributions Article
- The Arrow Effect under Competitive R&D
- Openness, Wage Floors and Technology Change
- Explaining the Evidence on Inequality and Growth: Informality and Redistribution
- Nominal Debt Dynamics, Credit Constraints and Monetary Policy
- TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
- A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
- Specialization Patterns and the Factor Bias of Technology
- Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
- ICT and Productivity Resurgence: A Growth Model for the Information Age
- A Macroeconomic Model of Entry with Exporters and Multinationals
- The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
- Advances Article
- Stable Sunspot Equilibria in a Cash-in-Advance Economy
- Should Monetary Policy Use Long-Term Rates?
- Habit Formation and Aggregate Consumption Dynamics
- Factor Utilization and the Real Impact of Financial Crises
Keywords for this article
indeterminacy;
learnability;
expectational stability;
seigniorage;
endogenous fluctuations
Articles in the same Issue
- Topics Article
- To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
- Economic Growth: A Channel Decomposition Exercise
- Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
- Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
- A Simple Wicksellian Macroeconomic Model
- Confidence-Enhanced Economic Growth
- A Positive Analysis of Targeted Employment Protection Legislation
- The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
- Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
- Does Permanent Income Determine the Vote?
- Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
- Savers, Spenders and Fiscal Policy in a Small Open Economy
- Assessing Sign Restrictions
- Euro Area Inflation Differentials
- Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
- Gold, Fiat Money, and Price Stability
- Housing Tenure and Wealth Distribution in Life Cycle Economies
- Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
- Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
- Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
- Contributions Article
- The Arrow Effect under Competitive R&D
- Openness, Wage Floors and Technology Change
- Explaining the Evidence on Inequality and Growth: Informality and Redistribution
- Nominal Debt Dynamics, Credit Constraints and Monetary Policy
- TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
- A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
- Specialization Patterns and the Factor Bias of Technology
- Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
- ICT and Productivity Resurgence: A Growth Model for the Information Age
- A Macroeconomic Model of Entry with Exporters and Multinationals
- The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
- Advances Article
- Stable Sunspot Equilibria in a Cash-in-Advance Economy
- Should Monetary Policy Use Long-Term Rates?
- Habit Formation and Aggregate Consumption Dynamics
- Factor Utilization and the Real Impact of Financial Crises
