Abstract
In Rational Beliefs Equilibria money is generically non-neutral.
Given the expectational perspective proposed by the Theory of Rational Belief
Equilibrium, we show that one of the most important factors in the emergence of
money non-neutrality is played by Endogenous Uncertainty. This, in contrast to
the Rational Expectations results of money neutrality and policy ineffectiveness,
leads to a scenario in which monetary policy has an impact on the real economy
and price volatility. The heterogeneity of beliefs together with the distribution and
intensity of agents' states of optimism/pessimism can amplify the real effect of
monetary policy and/or generate endogenous fluctuations in the economy which
are not explained by any exogenous shock. We claim that money non-neutrality
is mostly an expectations driven phenomenon. Indeed, additional assumptions of
asymmetry of information and/or unanticipated monetary policy are not needed to
explain the real effect of monetary policy as it is customary in the New Classical
Theory.
Lingua originale | English |
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pagine (da-a) | 97-126 |
Numero di pagine | 30 |
Rivista | Economic Theory |
Volume | 18 |
DOI | |
Stato di pubblicazione | Pubblicato - 2001 |
Keywords
- Endogenous Uncertainty
- Monetary Policy
- Money non neutrality
- Rational Belief Equilibrium
- Rational Beliefs
- Rational Expectations
- States of Belief