This paper studies a simple stochastic two-period general equilibrium model with money, an incomplete market of nominal assets, and a competitive banking system, intermediate between consumers and a Central Bank. There is a finite number of agents, consumers and banks. Default is not permitted. The public policy instruments are, besides real taxes implicit in the model, public debt and creation of money, both implemented at the first period. The equilibrium existence is established under a "Gains to trade" hypothesis and the assumption that banks have a nonzero endowment of money at each date-event of the model.
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Find related papers by JEL classification: C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis C62 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Existence and Stability Conditions of Equilibrium D20 - Microeconomics - - Production and Organizations - - - General D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
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