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2022-12-19T04:17:20Z
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A Model of Keynesian under Knightian Uncertainty
Fukuda, Shin-ichi
96591
330
Uncertainty
Choquet expected Utility
Price rigidity
Neutrality of money
JEL codes: E23, E32, E50
application/pdf
The purpose of this paper is to explore a source of nominal price rigidity and non-neutrality of money in a model of monopolistic competition under Knightian uncertainty. The decision-making theory in the analysis is that of expected utility under a nonadditive probability measure, that is, the Choquet expected utility model of preference. We apply this decision theory to a model of monopolistic competition without fixed cost of price adjustment. We show that when aversion to Knightian uncertainty exists, nominal price becomes rigid in a model of monopolistic competition. The model therefore has a Keynesian feature that nominal disturbances, particularly anticipated changes of money supply, have real effects on aggregate output fluctuations. The feature holds even if aversion to Knightian uncertainty is very small.
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technical report
日本経済国際共同センター
2001-05
Discussion paper series. CIRJE-F
CF-115
AA11450569
eng
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2001/2001cf115.pdf
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