Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets
AbstractThe general equilibrium model with incomplete financial markets (GEI) is extended by adding fiat money, fiscal and monetary policy and a cash-in-advance constraint. The central bank either pegs the interest rate or money supply while the fiscal authority sets a Ricardian or a non-Ricardian fiscal plan. We prove the existence of equilibria in all four scenarios. In Ricardian economies, the conditions required for existence are not more restrictive than in standard GEI. In non-Ricardian economies, the sufficient conditions for existence are more demanding. In the Ricardian economy, neither the price level nor the equivalent martingale measure are determinate.
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 InfoPaper provided by JEPS in its series JEPS Working Papers with number 05-005.
Length: 41 pages
Date of creation: Sep 2005
Date of revision:
Contact details of provider:
Web page: http://jeps.repec.org/
Money; incomplete markets; fiscal policy; indeterminacy;
Other versions of this item:
- Bai, Jinhui H. & Schwarz, Ingolf, 2006. "Monetary equilibria in a cash-in-advance economy with incomplete financial markets," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 422-451, August.
- Jinhui H. Bai & Ingolf Schwarz, 2006. "Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets," Working Papers gueconwpa~06-06-05, Georgetown University, Department of Economics.
- Ingolf Schwarz & Jinhui H. Bai, 2005. "Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2005_18, Max Planck Institute for Research on Collective Goods.
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-12-01 (All new papers)
- NEP-CBA-2005-12-01 (Central Banking)
- NEP-DGE-2005-12-01 (Dynamic General Equilibrium)
- NEP-MAC-2005-12-01 (Macroeconomics)
- NEP-MON-2005-12-01 (Monetary Economics)
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.:
- Gaetano Bloise & J. H. Dreze & H. M. Polemarchakis, 2003.
"Monetary Equilibria over an Infinite Horizon,"
03-19, University of Copenhagen. Department of Economics.
- Pradeep Dubey & John Geanakoplos, 2003. "Monetary Equilibrium with Missing Markets," Cowles Foundation Discussion Papers 1389, Cowles Foundation for Research in Economics, Yale University.
- Svensson, Lars E O, 1985. "Money and Asset Prices in a Cash-in-Advance Economy," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 919-44, October.
- Balasko, Yves & Cass, David, 1989. "The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets," Econometrica, Econometric Society, vol. 57(1), pages 135-62, January.
- Gaetano Bloise, 2006. "A note on the existence of a monetary equilibrium over an infinite horizon," Economic Theory, Springer, vol. 27(1), pages 59-77, 01.
- Tomoyuki Nakajima & Herakles Polemarchakis, 2005. "Money and Prices Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 223-246.
- DREZE, Jacques & POLEMARCHAKIS, Heracles, 1995.
CORE Discussion Papers
1995078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Pascal Gourdel & Leila Triki, 2005.
"Incomplete markets and monetary policy,"
Cahiers de la Maison des Sciences Economiques
b05024, Université Panthéon-Sorbonne (Paris 1).
- Pascal Gourdel & Leila Triki, 2005. "Incomplete markets and monetary policy," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00193970, HAL.
- Woodford, Michael, 2001.
"Fiscal Requirements for Price Stability,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 33(3), pages 669-728, August.
- Michael Woodford, 1995.
"Price Level Determinacy Without Control of a Monetary Aggregate,"
NBER Working Papers
5204, National Bureau of Economic Research, Inc.
- Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
- Pradeep Dubey & John Geanakoplos, 2006. "Determinacy with nominal assets and outside money," Economic Theory, Springer, vol. 27(1), pages 79-106, 01.
- repec:fth:louvco:0044 is not listed on IDEAS
- Werner, Jan, 1985. "Equilibrium in economies with incomplete financial markets," Journal of Economic Theory, Elsevier, vol. 36(1), pages 110-119, June.
- Duffie, Darrell & Shafer, Wayne, 1985. "Equilibrium in incomplete markets: I : A basic model of generic existence," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 285-300, June.
- Cass, David, 2006.
"Competitive equilibrium with incomplete financial markets,"
Journal of Mathematical Economics,
Elsevier, vol. 42(4-5), pages 384-405, August.
- David Cass, 2006. "Competitive Equilibrium with Incomplete Financial Markets," PIER Working Paper Archive 06-010, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
- Dubey, Pradeep & Geanakoplos, John, 2003. "Monetary equilibrium with missing markets," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 585-618, July.
- Pradeep Dubey & John Geanakoplos, 2003. "Inside and outside fiat money, gains to trade, and IS-LM," Economic Theory, Springer, vol. 21(2), pages 347-397, 03.
- Gaetano Bloise & Herakles Polemarchakis, 2006. "Theory and practice of monetary policy," Economic Theory, Springer, vol. 27(1), pages 1-23, 01.
- Hendrik Hakenes & Isabel Schnabel, 2006.
"The Threat of Capital Drain: A Rationale for Public Banks?,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2006_11, Max Planck Institute for Research on Collective Goods.
- Hakenes, Hendrik & Schnabel, Isabel, 2006. "The Threat of Capital Drain: A Rationale for Public Banks?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 107, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Gall).
If references are entirely missing, you can add them using this form.