Sunspot equilibria (rational bubbles) in a model of money-in-the-utility-function

Kiminori Matsuyama*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

31 Scopus citations

Abstract

Sunspot equilibria are constructed in Brock's (1975) model of money-in-the-utility-function. Serial correlations of real balances and the nominal interest rate in these equilibria can be either positive or negative. The example here suggests that local sunspots are more likely to exist when the agent's discount rate is small and that serial correlations in local sunspots, when they exist, are inversely related to the rate of money growth. It is also shown that stationary sunspots may exist even when equilibrium cycles do not.

Original languageEnglish (US)
Pages (from-to)137-144
Number of pages8
JournalJournal of Monetary Economics
Volume25
Issue number1
DOIs
StatePublished - Jan 1 1990

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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