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F. Smets and R. Wouters, “An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area,” Journal of the European Economic Association, Vol. 1, No. 5, 2003, pp. 1123-1175. doi:10.1162/154247603770383415

has been cited by the following article:

• TITLE: Asset Prices, Nominal Rigidities, and Monetary Policy: Role of Price Indexation

  AUTHORS: Kengo Nutahara

  KEYWORDS: Asset Prices; Monetary Policy; Equilibrium Determinacy; Price Indexation

  JOURNAL NAME: Theoretical Economics Letters, Vol.3 No.3, June 13, 2013

  ABSTRACT: A recent paper by Carlstrom and Fuerst [“Asset Prices, Nominal Rigidities, and Monetary Policy,” Review of Economic Dynamics, Vol. 10, 2007, pp. 256-275] finds that monetary policy response to share prices is a source of equilibrium indeterminacy because an increase in inflation implies a high real marginal cost and low share prices in a sticky-price economy. We find that if the New Keynesian Phillips curve has a lagged inflation term caused by price indexation, this effect is weakened. Moreover, equilibrium indeterminacy caused by the monetary policy response to share prices never arises if all the firms that cannot re-optimize their prices follow price indexation.