MONEY TAXES, MARKET SEGMENTATION, AND SUNSPOT EQUILIBRIA

Todd Keister ()

Macroeconomic Dynamics, 2001, vol. 5, issue 03, pages 327-352

Abstract: This paper investigates how volatile the general price level can be in an equilibrium where all uncertainty is extrinsic. The government operates a lump-sum redistribution policy using fiat money. An approach to modeling asset market segmentation is introduced in which this tax policy determines how volatile the price level can be, which in turn determines the volatility of consumption. The paper characterizes (i) the set of general price levels consistent with the existence of competitive equilibrium and (ii) the resulting set of equilibrium allocations. The results demonstrate how redistribution policies that are fixed in nominal terms can have a destabilizing effect on an economy, and show how to evaluate the amount of volatility that a particular policy may induce.

Date: 2001

Downloads: (external link)
http://journals.cambridge.org/abstract_S1365100500020010 link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cup:macdyn:v:5:y:2001:i:03:p:327-352_02

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press
Address: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Series data maintained by Mike Eden ().