Working Paper

Money and prices in models of bounded rationality

Abstract: In this paper the authors explore the ability of simple monetary models with bounded rationality to account for the joint distribution of money and prices. They impose restrictions on the size of the mistakes agents can make in equilibrium and argue that countries with high inflation are likely to satisfy these restrictions. Their computations show that the model with bounded rationality does neither improve nor deteriorate the ability of the model to match the data.

Keywords: Monetary policy; Equilibrium (Economics); Macroeconomics;

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2003

Number: 2003-15