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dc.contributor.advisorArnwine, Neilen_US
dc.contributor.authorKöseoğlu, Elifen_US
dc.date.accessioned2016-07-01T10:58:21Z
dc.date.available2016-07-01T10:58:21Z
dc.date.issued2003
dc.identifier.urihttp://hdl.handle.net/11693/29352
dc.descriptionCataloged from PDF version of article.en_US
dc.description.abstractWe examine the effect of inflation risk on a rational expectations monetary economy with endogenous production. The risk that we consider is of a change in the rate money growth from an initial steady-state level to a new level which is selected from a known distribution. The event of policy change is considered to be rare. The inclusion of rare events means that rational expectations does not require deviations of actual from expected inflation to be of zero mean or to be serially uncorrelated. We view the probability of a policy change, and the distribution of ensuing policy parameters as potentially changing over time. This highlights the role of News in determining the equilibrium of the economy. In the absence of any actual real or monetary shocks, changes in the perception about the likelihood and severity of a rare event have price, real and distributional effects. We find that inflation risk has price, real, and distributional effects.A risk of higher inflation increases the equilibrium price level and nominal interest rates. Inflation risk induces an increase in capital investment and production, and reduces the steady-state rate of return on equity. If the policy does not actually change, the ex-post real interest rate increases. The change in rates of return leads to a redistribution of wealth away from borrowers of nominal instruments towards lenders. Also we find that the theoretical second moment of future money growth has (almost) no effects on the economy.en_US
dc.description.statementofresponsibilityKöseoğlu, Elifen_US
dc.format.extentix, 34 leavesen_US
dc.language.isoEnglishen_US
dc.rightsinfo:eu-repo/semantics/openAccessen_US
dc.subjectInflation risken_US
dc.subjectMonetary economyen_US
dc.subjectNewsen_US
dc.subject.lccHG229 .K67 2003en_US
dc.subject.lcshInflation (Finance).en_US
dc.titleRare events and news in a rational expectations economyen_US
dc.typeThesisen_US
dc.departmentDepartment of Economicsen_US
dc.publisherBilkent Universityen_US
dc.description.degreeM.S.en_US
dc.identifier.itemidBILKUTUPB072047


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