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Interest rate rules and macroeconomic stabilization

By Mark WEDER

Abstract

High degrees of relative risk aversion induce indeterminacy in cash-in-advance economies. This paper finds that Taylor-style policies can pre-empt such sunspot equilibria. Spécifie policy recommendations dépend on the fundamentals of the economy. i.e. the cmpirically true value of coefficient of relative risk aversion.Cash-in-advance economies, Taylor rules, sunspot equilibria

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