Monetary equilibria over an infinite horizon
(2005) Economic Theory — Vol. 25, n° 1, p. 51-74 (2005)
Files
pdfdocument.pdf
Restricted Access - Adobe PDF
- 1.95 MB
Details
- Authors
- Abstract
- Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances through open market operations or loans. A public authority, which, most pertinently, inherits a strictly positive public debt, raises revenue from taxes and seignorage, and it distributes possible budget surpluses to individuals through transfers. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a non-trivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.
- Affiliations
University of Sassari DEIR Brown University Department of Economics
Citations
Dreze, J., Bloise, G., & Polemarchakis, H. (2005). Monetary equilibria over an infinite horizon. Economic Theory, 25(1), 51-74. https://doi.org/10.1007/s00199-004-0472-x (Original work published 2005)