Imaginary money against sticky relative prices

Eduardo Loyo ()
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Eduardo Loyo: Department of Economics PUC-Rio

No 448, Textos para discussão from Department of Economics PUC-Rio (Brazil)

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.

JEL-codes: E4 E5 F4 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2001-10
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in European Economic Review v. 46, p. 1073-1092, 2002

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Persistent link: https://EconPapers.repec.org/RePEc:rio:texdis:448

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