Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances. A public authority, inheriting a strictly positive public debt, raises revenue from taxes and seignorage. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a nontrivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
03-19.
Length: 24 pages Date of creation: Apr 2003 Date of revision: Handle: RePEc:kud:kuiedp:0319
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Find related papers by JEL classification: D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General 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
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References listed on IDEAS 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.:
DREZE, Jacques & POLEMARCHAKIS, Heracles, 2000.
"Monetary equilibria,"
CORE Discussion Papers
2000044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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