Logo
Munich Personal RePEc Archive

Revealing the naked truth behind price determinacy, infinite-horizon rational expectations, and inflation targeting

Eagle, David (2007): Revealing the naked truth behind price determinacy, infinite-horizon rational expectations, and inflation targeting.

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_1885.pdf

Download (180kB) | Preview

Abstract

By presenting two examples where the non-exploding criterion fails miserably, we demonstrate that that criterion does not universally apply. Therefore, by normal academic standards and burdens of proof, the previous price-determinacy literature has the burden to prove that the non-explosive criterion does apply to their models. However, that literature has not met and probably cannot meet that burden. Instead of using the non-explosive criterion, this paper looks at an economy with an arbitrarily large, but finite horizon and concludes that inflation targeting leads to price indeterminacy even with a Taylor-like feedback rule for setting the nominal interest rate.

Available Versions of this Item

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.