Interest Rate Pegs, Wealth Effects and Price Level Determinacy
21 Pages Posted: 4 Feb 2005
Date Written: December 2004
This paper analyses the issue of price level determinacy in an optimising general equilibrium model with overlapping generations. It is shown that under a pure interest rate peg, wealth effects rule out nominal indeterminacy but give rise to multiple equilibria.
Keywords: Price Level Determination, Interest Rate Pegging, Multiple Equilibria
JEL Classification: E31, E63
Suggested Citation: Suggested Citation