Sticky Prices and Indeterminacy

Mark Weder

Journal of Money, Credit and Banking, 2008, vol. 40, issue 5, 1073-1082

Abstract: The aim of this paper is to analyze the link between price rigidity and indeterminacy. This is done within a cash-in-advance economy that is known to exhibit indeterminacy at high degrees of relative risk aversion. My findings show that price stickiness reduces the scope of these sunspot equilibria: to be compatible with indeterminacy, sluggish price adjustment requires degrees of relative risk aversion that prove too high to square with data. Copyright (c) 2008 The Ohio State University.

Date: 2008
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Journal Article: Sticky Prices and Indeterminacy (2008)
Working Paper: Sticky Prices and Indeterminacy (2006)
Working Paper: Sticky Prices and Indeterminacy (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:40:y:2008:i:5:p:1073-1082

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