We add inside and outside money to the standard GEI model. If there enough gains to trade via money, then monetary equilibrium (ME) exists and money has positive value, even when GEI fails to exist. The nonexistence of GEI shows up as a liquidity trap in terms of the ME. In sharp contrast to GEI, the ME are generically determinate not only in terms of real, but also financial, variables. © 2003...

Papers in this volume were prepared for a meeting organised by the BIS and the Federal Reserve Bank (FRB) of Atlanta in Mexico City in May 2007. The views expressed are those of the authors and do not necessarily reflect the views of the BIS or the institutions represented at the meeting. Individual papers (or excerpts thereof) may be reproduced or translated with the authorisation of the autho...

This paper investigates the learnability of the equilibrium under adaptive learning with heterogeneous and misspecified models. Agents have imperfect and mutually different information sets of economic variables, so they form heterogeneous expectations under learning rules that are differently underparameterized. Under heterogeneous learning, the economy converges to a type of restricted percep...

We explore determinacy and expectational stability (learnability) of rational expectations equilibrium (REE) in New Keynesian (NK) models that include capital. Using a consistent calibration across three different models—laboronly, firm-specific capital, or an economy-wide rental market for capital, we provide a clear picture of when REE is determinate and learnable and when it is not under a v...