Monetary discretion, pricing complementarity, and dynamic multiple equilibria

• 成果类型: Article
• 署名作者: King, RG; Wolman, AL
• 署名单位: Boston University; Federal Reserve System - USA; Federal Reserve Bank - Richmond; National Bureau of Economic Research
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1162/0033553042476170
• 发表日期: 2004
• 页码: 1513-1553
• 关键词: EXPECTATION TRAPS; POLICY

摘要

A discretionary policy-maker responds to the state of the economy each period. Private agents' current behavior determines the future state based on expectations of future policy. Discretionary policy thus can lead to dynamic complementarity between private agents and a policy-maker, which in turn can generate multiple equilibria. Working in a simple new Keynesian model with two-period staggered pricing-in which equilibrium is unique under commitment-we illustrate this interaction: if firms expect a high future money supply, (i) they will set a high current price; and (ii) the future monetary authority will accommodate with a higher money supply, so as not to distort relative prices. We show that there are two point-in-time equilibria under discretion, and we construct a related stochastic sunspot equilibrium.