0 a dark spot that temporarily appears, usually in groups, on the sun’s surface -- solplet
1 a sunny place that is a popular holiday/vacation destination -- solskin
Since sunspots change the potential payoff of the agents engaged in bargaining, they affect the final quantities traded in monetary exchanges.
Because this value can always vary with the realization of a sunspot variable, consumption is made excessively volatile.
This model has become a workhorse for much of the subsequent sunspot literature.
One of these structures is driven by fundamentals alone; the other is driven in part by nonfundamental "sunspot" shocks.
One good friend, a distinguished macroeconomist, wrote to try to persuade me to give up sunspots on grounds of their unpopularity.
Each of these is by itself a source of sunspot equilibria, but my intuition was initially driven by the double infinity and bubbles.
The existence of the sunspot equilibria so defined provides a clear method for defining bubbles.
In this economy, agents use the sunspot signal observed at the beginning of the current period to form expectations on next-period prices only.
