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Monetary equilibrium and the differentiability of the value function

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Author Info
Aliprantis, C.D.
Camera, G.
Ruscitti, F.

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Abstract

In this study we offer a new approach to proving the differentiability of the value function, which complements and extends the literature on dynamic programming. This result is then applied to the analysis of equilibrium in the recent class of monetary economies developed in [Lagos, R., Wright, R., 2005. A unified framework for monetary theory and policy analysis. Journal of Political Economy 113, 463-484]. For this type of environments we demonstrate that the value function is differentiable and this guarantees that the marginal value of money balances is well defined.

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File URL: http://www.sciencedirect.com/science/article/B6V85-4T26309-1/2/b86bb5f3b944100792860f76ee674590
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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 2 (February)
Pages: 454-462
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Handle: RePEc:eee:dyncon:v:33:y:2009:i:2:p:454-462

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Keywords: Value function Optimal plans Money;

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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.:
  1. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1982. "Characterization of optimal plans for stochastic dynamic programs," Journal of Economic Theory, Elsevier, vol. 28(2), pages 221-234, December. [Downloadable!] (restricted)
  2. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, 05. [Downloadable!] (restricted)
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  3. Paul Milgrom & Ilya Segal, 2002. "Envelope Theorems for Arbitrary Choice Sets," Econometrica, Econometric Society, vol. 70(2), pages 583-601, March. [Downloadable!] (restricted)
  4. Aliprantis, C.D. & Camera, Gabriele & Puzzello, D., 2005. "Anonymous Markets and Monetary Trading," Purdue University Economics Working Papers 1179, Purdue University, Department of Economics. [Downloadable!]
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  5. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, vol. 70(3), pages 929-969, May. [Downloadable!] (restricted)
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  6. Maria Luisa Gota & Luigi Montrucchio, 1999. "On Lipschitz continuity of policy functions in continuous-time optimal growth models," Economic Theory, Springer, vol. 14(2), pages 479-488. [Downloadable!] (restricted)
  7. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, vol. 47(3), pages 727-32, May. [Downloadable!] (restricted)
  8. Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08. [Downloadable!] (restricted)
  9. Camera, G. & Corbae, D., 1998. "Money and Price Dispersion," Working Papers 98-03, University of Iowa, Department of Economics.
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  10. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
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