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Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt

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  • Pingle, M.
  • Tesfatsion, Leigh S.

Abstract

"Active Intermediation in a Monetary Overlapping Generations Economy" ( ps,297K) ( pdf,600K ), (with M. Pingle), Economic Report No. 42, Iowa State University, April 1997. Final version appears in Macroeconomic Dynamics 2 (1998), pp. 183--212. Abstract: This study demonstrates that the reason for the failure of the first welfare theorem in the overlapping generations model with production and unsecured debt by Tirole (Econometrica, 1985) is that intermediation is modelled as a purely passive coordination activity implemented by a Walrasian Auctioneer. When intermediation is instead modelled as a contestable activity carried out by a corporate intermediary owned by consumer-shareholders and operated in their interest, every equilibrium is Pareto efficient.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1228.

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Date of creation: 01 Jan 1998
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Publication status: Published in Macroeconomic Dynamics 1998, vol. 2, pp. 183-212
Handle: RePEc:isu:genres:1228

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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References

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  1. Pingle, Mark & Tesfatsion, Leigh, 1991. "Overlapping generations, intermediation, and the First Welfare Theorem," Journal of Economic Behavior & Organization, Elsevier, vol. 15(3), pages 325-345, May.
  2. 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.
  3. David Cass & Menahem E. Yaari, 1965. "A Re-Examination of the Pure Consumption Loans Model," Cowles Foundation Discussion Papers 195, Cowles Foundation for Research in Economics, Yale University.
  4. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  5. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
  6. 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.
  7. 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.
  8. 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.
  9. Mark L. Gertler, 1988. "Financial Structure and Aggregate Economic Activity: An Overview," NBER Working Papers 2559, National Bureau of Economic Research, Inc.
  10. Mark Pingle & Leigh Tesfatsion, 1993. "``Active Intermediation in a Monetary Overlapping Generations Economy''," Macroeconomics 9312001, EconWPA, revised 04 Dec 1993.
  11. GRANDMONT, Jean-Michel & LAROQUE, Guy, . "Money in the pure consumption loan model," CORE Discussion Papers RP -152, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  13. Leigh TESFATSION, 1995. "How Economists Can Get Alife," Economic Report 37, Iowa State University Department of Economics.
  14. 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.
  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. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2011. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9780521177009, October.
  17. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  18. Bryant, John, 1981. "Bank Collapse and Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 454-64, November.
  19. 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.
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Cited by:
  1. Michael Magill & Martine Quinzii, . "The Stock Market in the Overlapping Generations," Department of Economics 99-13, California Davis - Department of Economics.
  2. Tesfatsion, Leigh, 2006. "Agent-Based Computational Modeling And Macroeconomics," Staff General Research Papers 12402, Iowa State University, Department of Economics.
  3. 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.

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