Advanced Search
MyIDEAS: Login

Active Intermediation In Overlapping Generations Economies With Production And Unsecured Debt

Contents:

Author Info

  • Pingle, Mark
  • Tesfatsion, Leigh

Abstract

It is well known that the first welfare theorem can fail foroverlapping generations economies with private production andunsecured debt. This paper demonstrates that the reason for thisfailure is that intermediation is modeled as a purely passivecoordination activity implemented by a Walrasian Auctioneer. Whenintermediation is modeled instead as a contestable activity carriedout by a corporate intermediary owned by consumer-shareholders andoperated in their interest, every equilibrium is Pareto efficient.In broader terms, these findings caution that the inefficiency observed in standard modelings of overlapping generations economiesmay not be the reflection of an intrinsic market failure. Rather,the observed inefficiency could instead be due to a fundamentalincompleteness in the model specification the presumed inability ofprivate agents to exploit the earnings opportunities associated with incurring and forever rolling over debt.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://journals.cambridge.org/abstract_S1365100598007032
File Function: link to article abstract page
Download Restriction: no

Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 2 (1998)
Issue (Month): 02 (June)
Pages: 183-212

as in new window
Handle: RePEc:cup:macdyn:v:2:y:1998:i:02:p:183-212_00

Contact details of provider:
Postal: The Edinburgh Building, Shaftesbury Road, Cambridge CB2 2RU UK
Fax: +44 (0)1223 325150
Web page: http://journals.cambridge.org/jid_MDYProvider-Email:journals@cambridge.org

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pingle, M. & Tesfatsion, Leigh S., 1991. "Overlapping Generations, Intermediation, and the First Welfare Theorem," Staff General Research Papers 11185, Iowa State University, Department of Economics.
  2. Gertler, Mark, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(3), pages 559-88, August.
  3. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. II. The case of pure exchange with money," Journal of Economic Theory, Elsevier, vol. 24(1), pages 112-142, February.
  4. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2011. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9781107003491.
  5. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  6. Bennett T. McCallum, 1988. "The Optimal Inflation Rate in an Overlapping-Generations Economy with Land," NBER Working Papers 1892, National Bureau of Economic Research, Inc.
  7. Tesfatsion, Leigh, 1997. "How Economists Can Get Alife," Staff General Research Papers 1685, Iowa State University, Department of Economics.
  8. Grandmont, Jean-Michel & Laroque, Guy, 1973. "Money in the pure consumption loan model," Journal of Economic Theory, Elsevier, vol. 6(4), pages 382-395, August.
  9. Mark Pingle & Leigh Tesfatsion, 1993. "``Active Intermediation in a Monetary Overlapping Generations Economy''," Macroeconomics 9312001, EconWPA, revised 04 Dec 1993.
  10. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct.
  11. Bryant, John, 1981. "Bank Collapse and Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 454-64, November.
  12. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  13. David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, vol. 74, pages 353.
  14. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  15. Pingle, M. & Tesfatsion, Leigh S., 1998. "Active Intermediation in an Monetary Overlapping Generations Economy," Staff General Research Papers 1227, Iowa State University, Department of Economics.
  16. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
  17. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
  18. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-45, September.
  19. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Magill, Michael & Quinzii, Martine, 2003. "Nonshiftable capital, affine price expectations and convergence to the Golden Rule," Journal of Mathematical Economics, Elsevier, vol. 39(3-4), pages 239-272, June.
  2. Michael Magill & Martine Quinzii, . "The Stock Market in the Overlapping Generations," Department of Economics 99-13, California Davis - Department of Economics.
  3. Tesfatsion, Leigh, 2006. "Agent-Based Computational Modeling And Macroeconomics," Staff General Research Papers 12402, Iowa State University, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cup:macdyn:v:2:y:1998:i:02:p:183-212_00

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keith Waters).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.