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

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.