The indeterminacy of prices under interest rate pegging: The non-Ricardian case

• 成果类型: Article
• 署名作者: Cushing, MJ
• 署名单位: University of Nebraska System; University of Nebraska Lincoln
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(99)00012-4
• 发表日期: 1999
• 页码: 131-148
• 关键词: interest rate pegging; indeterminacy; Ricardian

摘要

This paper investigates the issue of price level indeterminacy under a pure interest rate peg in models that depart from standard Ricardian assumptions. Using a monetary version of Blanchard's finite horizons model, I find wealth effects operating on government bonds are not sufficient to determine a unique price level. Next, I consider price determination under a non-Ricardian fiscal authority. I show that, if agents rationally perceive the possibility of fiscal default, the price level is again indeterminate. I conclude that departures from Ricardian equivalence are not sufficient to ensure a unique price level under a monetary policy of pure interest rate pegging. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classification: E42; E31.