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Indeterminacy of rational expectations equilibria in sequential financial markets

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  • Donati, Paola

Abstract

We provide a general characterization of the structure of rational expectations equilibria of any degree of revelation for pure exchange, sequential economies, with finitely many states of private information, an incomplete financial market and nominal assets. We estimate the dimension of the rational expectations equilibria for any degree of revelation. Then, we show how a central bank, by deciding on the money supply, may affect the revelation of information at equilibrium. JEL Classification: D52, D80, D82, E52

Suggested Citation

  • Donati, Paola, 2003. "Indeterminacy of rational expectations equilibria in sequential financial markets," Working Paper Series 262, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2003262
    Note: 357984
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    References listed on IDEAS

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    More about this item

    Keywords

    incomplete markets; indeterminacy; Information revelation; monetary policy;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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