This paper studies the equilibrium dynamics of an overlapping generations model with capital, money and cash-in-advance constraints. At each date the economy can experience two different regimes. In the first one the cash-in-advance constraint is binding and money is a dominated asset. In the second one, the constraint is strictly satisfied and money has the same return as capital. When the second regime holds on some finite interval, we say that the economy experiences a temporary bubble. We prove that temporary bubbles can exist in an economy which would experience under accumulation without money.
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Find related papers by JEL classification: D9 - Microeconomics - - Intertemporal Choice and Growth E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates G1 - Financial Economics - - General Financial Markets
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