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On The Inefficacy Of Temporary Policy In A Dynamic General Equilibrium With Money

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  • ATSUMASA KONDO

Abstract

We construct a dynamic economy with many consumers with money in their utilities. Two main results—a turnpike theorem and inefficacy of temporary policy—are established in a dynamic general equilibrium framework in which price effects generated through markets are explicitly factored in. Turnpike, which is perfectly independent from wealth distribution among the heterogeneous consumers, will be globally attractive. Temporary policy is not effective not only for the future but for the current economy if the long‐run interest rate level is low. The inefficacy result coincides with an intuitive explanation by the standard permanent income hypothesis.

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  • Atsumasa Kondo, 2008. "On The Inefficacy Of Temporary Policy In A Dynamic General Equilibrium With Money," The Japanese Economic Review, Japanese Economic Association, vol. 59(3), pages 324-344, September.
  • Handle: RePEc:bla:jecrev:v:59:y:2008:i:3:p:324-344
    DOI: 10.1111/j.1468-5876.2008.00412.x
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    File URL: https://doi.org/10.1111/j.1468-5876.2008.00412.x
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    Cited by:

    1. Dai, Darong, 2011. "Wealth Martingale and Neighborhood Turnpike Property in Dynamically Complete Market with Heterogeneous Investors," MPRA Paper 46416, University Library of Munich, Germany.
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    3. Darong Dai, 2013. "Wealth Martingale and Neighborhood Turnpike Property In Dynamically Complete Market With Heterogeneous Investors," Economic Research Guardian, Weissberg Publishing, vol. 3(2), pages 86-110, December.

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