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Monetary equilibria over an infinite horizon

Bloise, Gaetano Osvaldo and Dréze, Jacques H. and Polemarchakis, Herakles M. (2005) Monetary equilibria over an infinite horizon. Economic Theory, Vol. 25 (1), p. 51-74. eISSN 1432-0479. Article.

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DOI: 10.1007/s00199-004-0472-x

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.

Item Type:Article
ID Code:2684
Status:Published
Refereed:Yes
Uncontrolled Keywords:Money, equilibrium, indeterminacy, monetary policy, fiscal policy
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:001 Università di Sassari > 01 Dipartimenti > Economia, impresa, regolamentazione
Publisher:Springer Berlin / Heidelberg
eISSN:1432-0479
Additional Information:Paper presented at the Symposium in honor of Birgit Grodal (1943-2004), Copenhagen, September 2002.
Deposited On:18 Aug 2009 10:08

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