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VERSION:2.0
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SUMMARY:Bounds on Price Setting
DTSTART:20190510T103000
DTEND:20190510T120000
DTSTAMP:20260406T194610Z
UID:e709cef3a36f3bead0fdc1f1b862fef0c56a9464ccd93209c106329f
CATEGORIES:Conferences - Seminars
DESCRIPTION:Narayana KOCHERLAKOTA\, University of Rochester\nI illustrate 
 that the equilibria of games with strategic complementarities may be of li
 ttle predictive value if the players have non-compact action sets. Motivat
 ed by this observation\, I study a class of macroeconomic models in which 
 all firms can costlessly choose any price at each date from a compact inte
 rval (indexed to last period’s price level). I prove three results that 
 are valid for any such compact interval. First\, given any allocation\, th
 ere is a (possibly time-dependent) specification of monetary and fiscal po
 licy that implies that allocation is part of an equilibrium. Second\, give
 n any specification of monetary and fiscal policy in which the former is t
 ime invariant and the latter is Ricardian (in the sense of Woodford (1995)
 )\, there is a sequence of equilibria in which consumption converges to ze
 ro on a date-by-date basis. These first two results suggest that standard 
 macroeconomic models without pricing bounds (be they sticky or flex price)
  provide a false degree of confidence in long-run macroeconomic stability 
 and undue faith in the long-run irrelevance of monetary policy. The paper
 ’s final result constructs a non-Ricardian nominal framework (in which t
 he long-run growth rate of nominal government liabilities is sufficiently 
 high) that pins down a unique stable real outcome as an equilibrium.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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