A note on short-term intersectoral factor immobility
Article Abstract:
Two effects of the adjustement process to real shocks in a trading system characterized by short-term factor immobilities have been identified. One effect is a rise in future income in relation to current income due to the time it takes for production factors to realign themselves. Another effect is the dynamic relative price effect due to the presence of nontradeable goods. Both effects, which influence optimal savings and borrowing decisions, are usually studied separately. A multi-period model with optimizing agents was developed to study both effects operating at the same time. An illustrative example of the use of the model is presented.
Publication Name: Journal of Economic Dynamics & Control
Subject: Economics
ISSN: 0165-1889
Year: 1995
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Stationary sunspot equilibrium in a cash-in-advance economy
Article Abstract:
A study showing the existence and uniqueness of a type of stationary sunspot equilibria in the 1987 cash-in-advance model of Robert Lucas and Nancy Stokey is presented. Sunspot equilibria refers to situations in which extrinsic uncertainty affects equilibrium prices and allocations. It was shown that sunspots affect the price of money and the prices of productive assets. Moreover, sunspots may cause the prices of productive assets to fluctuate below their market fundamentals permanently.
Publication Name: Journal of Economic Dynamics & Control
Subject: Economics
ISSN: 0165-1889
Year: 1995
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