Abstract
We investigate sunspot equilibria in a static, one-commodity model with taxes and transfers denominated in money units. Volatility in this economy is purely monetary, since the only uncertainty is about the price level. We construct simple, robust examples of sunspot equilibria that arenotmere randomizations over certainty equilibria. We also identify the source of these SSEs: Equilibrium in the securities market is determinedas ifthere were no restricted consumers and the unrestricted consumers faceintrinsicuncertainty. Perfect securities markets eliminate allocation uncertainty, but they exacerbate price-level volatility.Journal of Economic LiteratureClassification Numbers: D50, D52, D84, E31, E62.
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