On multiple equilibria and the rational expectations hypothesis

Jean-Marc Tallon

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Abstract: This paper analyzes through a simple two-period model the fact that, if some agents hold inside money intertemporally, the second-period ldquonormalizationrdquo matters. Thus, there are several equilibria of the second-period economy, indexed by the level of inflation. A concept of equilibrium acknowledging this fact, and requiring that agents put some weight on any of the possible second-period equilibrium price vectors is developed. Such an equilibrium is shown to exist, and is illustrated by an example.

Keywords: multiple; equilibria (search for similar items in EconPapers)
Date: 1996-02
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Published in Economic Theory, 1996, 7 (1), pp.113-124. ⟨10.1007/BF01212185⟩

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Related works:
Journal Article: On Multiple Equilibria and the Rational Expectations Hypothesis (1996)
Journal Article: On multiple equilibria and the rational expectations hypothesis (1995)
Working Paper: On multiple Equilibria and the Rational Expectations Hypothesis (1994)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00499387

DOI: 10.1007/BF01212185

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