Stable Sunspot Equilibria in a Cash-in-Advance Economy
George Evans,
Seppo Honkapohja and
Marimon Ramon ()
Additional contact information
Marimon Ramon: European University Institute and UPF-CREi
The B.E. Journal of Macroeconomics, 2007, vol. 7, issue 1, 38
Abstract:
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 (search for similar items in EconPapers)
Date: 2007
References: View complete reference list from CitEc
Citations: View citations in EconPapers (11)
Downloads: (external link)
https://doi.org/10.2202/1935-1690.1165 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.
Related works:
Working Paper: Stable Sunspot Equilibria in a Cash-in-Advance Economy (2015) 
Working Paper: Stable Sunspot Equilibira in a Cash-in-Advance Economy (2005) 
Working Paper: Stable sunspot equilibria in a cash-in-advance economy (2005) 
Working Paper: Stable Sunspot Equilibria in a Cash-in-Advance Economy (2001) 
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: https://EconPapers.repec.org/RePEc:bpj:bejmac:v:7:y:2007:i:1:n:3
Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html
DOI: 10.2202/1935-1690.1165
Access Statistics for this article
The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti
More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().