In Rational Beliefs Equilibria money is generically non-neutral. Given the expectational perspective proposed by the Theory of Rational Belief Equilibrium, we show that one of the most important factors in the emergence of money non-neutrality is played by Endogenous Uncertainty. This, in contrast to the Rational Expectations results of money neutrality and policy ineffectiveness, leads to a scenario in which monetary policy has an impact on the real economy and price volatility. The heterogeneity of beliefs together with the distribution and intensity of agents' states of optimism/pessimism can amplify the real effect of monetary policy and/or generate endogenous fluctuations in the economy which are not explained by any exogenous shock. We claim that money non-neutrality is mostly an expectations driven phenomenon. Indeed, additional assumptions of asymmetry of information and/or unanticipated monetary policy are not needed to explain the real effect of monetary policy as it is customary in the New Classical Theory.

Motolese, M., Money Non-neutrality in a Rational Belief Equilibrium with Financial Assets., <<ECONOMIC THEORY>>, 2001; 18 (1): 97-126. [doi:10.1007/PL00004137] [http://hdl.handle.net/10807/14267]

Money Non-neutrality in a Rational Belief Equilibrium with Financial Assets.

Motolese
2001

Abstract

In Rational Beliefs Equilibria money is generically non-neutral. Given the expectational perspective proposed by the Theory of Rational Belief Equilibrium, we show that one of the most important factors in the emergence of money non-neutrality is played by Endogenous Uncertainty. This, in contrast to the Rational Expectations results of money neutrality and policy ineffectiveness, leads to a scenario in which monetary policy has an impact on the real economy and price volatility. The heterogeneity of beliefs together with the distribution and intensity of agents' states of optimism/pessimism can amplify the real effect of monetary policy and/or generate endogenous fluctuations in the economy which are not explained by any exogenous shock. We claim that money non-neutrality is mostly an expectations driven phenomenon. Indeed, additional assumptions of asymmetry of information and/or unanticipated monetary policy are not needed to explain the real effect of monetary policy as it is customary in the New Classical Theory.
Inglese
Motolese, M., Money Non-neutrality in a Rational Belief Equilibrium with Financial Assets., <<ECONOMIC THEORY>>, 2001; 18 (1): 97-126. [doi:10.1007/PL00004137] [http://hdl.handle.net/10807/14267]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/14267
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