Cash-In-Advance Constraints, Bubbles, And Monetary Policy
AbstractIn this paper, we study the equilibrium dynamics of an overlapping generations model with capital, money, and cash-in-advance constraints. At each period, the economy can experience two different regimes: Either the cash-in-advance constraint is binding and money is a dominated asset, or the constraint is strictly satisfied and money has the same return as capital. When the second regime occurs, we say that the economy experiences a temporary bubble. We show the existence of temporary bubbles, and we prove that cyclical equilibria may exist. In these equilibria, the economy experiences some periods without bubbles and some periods with bubbles. We also show that monetary creation can be used to eliminate temporary bubbles.
Download InfoIf 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.
Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 9 (2005)
Issue (Month): 01 (February)
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:firstname.lastname@example.org
Other versions of this item:
- Philippe Michel & Bertrand Wigniolle, 2005. "Cash-in-advance constraints, bubbles and monetary policy," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00268861, HAL.
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.:
- Frank Hahn & Robert Solow, 1997. "A Critical Essay on Modern Macroeconomic Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258154x, June.
- Michel, Philippe & Wigniolle, Bertrand, 2003. "Temporary bubbles," Journal of Economic Theory, Elsevier, vol. 112(1), pages 173-183, September.
- Stacey L. Schreft & Bruce D. Smith, 1997.
"The effects of open market operations in a model of intermediation and growth,"
Research Working Paper
97-03, Federal Reserve Bank of Kansas City.
- Schreft, Stacey L & Smith, Bruce D, 1998. "The Effects of Open Market Operations in a Model of Intermediation and Growth," Review of Economic Studies, Wiley Blackwell, vol. 65(3), pages 519-50, July.
- Stacey L. Schreft & Bruce D. Smith, 1994. "The effects of open market operations in a model of intermediation and growth," Working Paper 94-10, Federal Reserve Bank of Richmond.
- Stacey L. Schreft & Bruce D. Smith, 1995. "The effects of open market operations in a model of intermediation and growth," Working Papers 562, Federal Reserve Bank of Minneapolis.
- 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.
- Huybens, Elisabeth & Smith, Bruce D., 1998.
"Financial Market Frictions, Monetary Policy, and Capital Accumulation in a Small Open Economy,"
Journal of Economic Theory,
Elsevier, vol. 81(2), pages 353-400, August.
- Elisabeth Huybens & Bruce D. Smith, 1996. "Financial Market Frictions, Monetary Policy and Capital Accumulation in a Small Open Economy," Working Papers 9608, Centro de Investigacion Economica, ITAM.
- Pere Gomis-Porqueras, 2000. "Money, banks and endogenous volatility," Economic Theory, Springer, vol. 15(3), pages 735-745.
- Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
- Stefano Bosi & Thomas Seegmuller, 2009.
"On Rational Exuberance,"
UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
- Stefano Bosi & Thomas Seegmuller, 2009. "On rational exuberance," Documents de travail du Centre d'Economie de la Sorbonne 09004, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- Lise Clain-Chamosset-Yvrard & Thomas Seegmuller, 2013.
"Rational Bubbles and Macroeconomic Fluctuations: The (De-)Stabilizing Role of Monetary Policy,"
- Lise Clain-Chamosset-Yvrard & Thomas Seegmuller, 2012. "Rational Bubbles and Macroeconomic Fluctuations. The(De-)Stabilizing Role of Monetary Policy," AMSE Working Papers 1207, Aix-Marseille School of Economics, Marseille, France, revised 23 Mar 2012.
- Thomas Seegmuller & Lise Clain-Chamosset-Yvrard, 2013. "The Stabilizing Virtues of Fiscal vs. Monetary Policy on Endogenous Bubble Fluctuations," AMSE Working Papers 1343, Aix-Marseille School of Economics, Marseille, France, revised 17 Aug 2013.
- Lise Clain-Chamosset-Yvrard & Thomas Seegmuller, 2013. "The Stabilizing Virtues of Fiscal vs. Monetary Policy on Endogenous Bubble Fluctuations," Working Papers halshs-00854536, HAL.
- Firouz Gahvari & Luca Micheletto, 2012.
"Monetary Policy and Redistribution: What can or cannot be Neutralized with Mirrleesian Taxes,"
CESifo Working Paper Series
3711, CESifo Group Munich.
- Gahvari, Firouz & Micheletto, Luca, 2012. "Monetary policy and redistribution: What can or cannot be neutralized with Mirrleesian taxes," Working Paper Series, Center for Fiscal Studies 2012:5, Uppsala University, Department of Economics.
- Tarishi Matsuoka, 2011. "Temporary Bubbles and Discount Window Policy," KIER Working Papers 802, Kyoto University, Institute of Economic Research.
- Firouz Gahvari, 2009. "Friedman Rule in a Model with Endogenous Growth and Cash-in-advance Constraint," CESifo Working Paper Series 2708, CESifo Group Munich.
- repec:hal:journl:halshs-00367689 is not listed on IDEAS
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.