Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 2006, Volume 74, Issue 2

Aggregation and Optimization with State‐Dependent Pricing: A Comment

https://doi.org/10.1111/j.1468-0262.2006.00672.x
p. 565-573

Vladislav Damjanovic, Charles Nolan

A key argument in Caplin and Leahy (1997) states that the correlation between monetary shocks and output is falling in the variance of the money supply. We demonstrate that this conclusion depends on solving for the correlation in the nonstationary state of the model. In the stationary state, that correlation is initially rising.


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