Money growth rules as stabilization policies in open economies

Mark Weder

International Economic Journal, 2008, vol. 22, issue 4, 525-537

Abstract: High degrees of relative risk aversion induces indeterminacy in cash-in-advance economies. In a small open economy context, this paper finds that endogenous money growth rules can pre-empt such sunspot equilibria in an open economy context. The most promising candidates are policies that actively target past inflation movements or aggregate demand as well as the expected price level.

Keywords: cash-in-advance economies; Taylor rules; sunspot equilibria (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/10168730802497635

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