Skip to main content
×
×
Home

MONEY TAXES, MARKET SEGMENTATION, AND SUNSPOT EQUILIBRIA

  • Todd Keister (a1)
    • Published online: 29 June 2001
Abstract

This paper investigates how volatile the general price level can be in an equilibrium where all uncertainty is extrinsic. The government operates a lump-sum redistribution policy using fiat money. An approach to modeling asset market segmentation is introduced in which this tax policy determines how volatile the price level can be, which in turn determines the volatility of consumption. The paper characterizes (i) the set of general price levels consistent with the existence of competitive equilibrium and (ii) the resulting set of equilibrium allocations. The results demonstrate how redistribution policies that are fixed in nominal terms can have a destabilizing effect on an economy, and show how to evaluate the amount of volatility that a particular policy may induce.

Copyright
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 16 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 20th September 2018. This data will be updated every 24 hours.