On the plausibility of sunspot equilibria
In: Research in economics: Ricerche economiche, Band 57, Heft 1, S. 65-81
ISSN: 1090-9451
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In: Research in economics: Ricerche economiche, Band 57, Heft 1, S. 65-81
ISSN: 1090-9451
We develop a monetary model with flexible supply of labor, cash in advance constraints and government spending financed by seignorage. This model has two regimes. One regime is conventional with two steady states. The other regime has a unique steady state which can be determinate or indeterminate. In the latter case there exist sunspot equilibria which are stable under adaptive learning, taking the form of noisy finite state Markov processes at resonant frequencies. For a range of parameter values, a sufficient reduction in government purchases will eliminate these equilibria.
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In: Macroeconomic Dynamics, Band 5, Heft 3
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In: Journal of economic dynamics & control, Band 17, Heft 1-2, S. 289-317
ISSN: 0165-1889
In: Journal of economic dynamics & control, Band 17, Heft 1-2, S. 289-317
ISSN: 0165-1889
In: Working paper series Center for Economic Studies ; Ifo Institute ; 497
In: Journal of economic dynamics & control, Band 28, Heft 2, S. 273-285
ISSN: 0165-1889
In: IZA Discussion Paper No. 4302
SSRN
In: Journal of economics, Band 65, Heft 3, S. 257-277
ISSN: 1617-7134
In: Journal of economic dynamics & control, Band 37, Heft 6, S. 1126-1141
ISSN: 0165-1889
In: Working paper series Center for Economic Studies ; Ifo Institute ; 478
In: Journal of Monetary Economics, Band 25, Heft 1, S. 137-144
In: Journal of Monetary Economics, Band 54, Heft 3, S. 879-903
In: Journal of economic dynamics & control, Band 28, Heft 1, S. 171-181
ISSN: 0165-1889
In: American economic review, Band 95, Heft 3, S. 510-529
ISSN: 1944-7981
We show that extrinsic or nonfundamental uncertainty influences markets in a controlled environment. This work provides the first direct evidence of sunspot equilibria. These equilibria require a common understanding of the semantics of the sunspot variable, and they appear to be sensitive to the flow of information. Sunspots always occur in a closed-book call market, but they happen only occasionally in a double auction, where inframarginal bids and offers are observable.