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.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Macroeconomic Dynamics.
Volume (Year): 9 (2005)
Issue (Month): 01 (February)
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- 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.
- Tarishi Matsuoka, 2011. "Temporary Bubbles and Discount Window Policy," KIER Working Papers 802, Kyoto University, Institute of Economic Research.
- 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.
- 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.
- repec:hal:cesptp:halshs-00367689 is not listed on IDEAS
- 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.
- repec:hal:journl:halshs-00367689 is not listed on IDEAS
- Firouz Gahvari, 2009. "Friedman Rule in a Model with Endogenous Growth and Cash-in-advance Constraint," CESifo Working Paper Series 2708, CESifo Group Munich.
- Yanagihara, Mitsuyoshi & Lu, Chen, 2013. "Cash-in-advance constraint, optimal monetary policy, and human capital accumulation," Research in Economics, Elsevier, vol. 67(3), pages 278-288.
- Lise Clain-Chamosset-Yvrard & Thomas Seegmuller, 2013. "The Stabilizing Virtues of Fiscal vs. Monetary Policy on Endogenous Bubble Fluctuations," Working Papers halshs-00854536, HAL.
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