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Active intermediation in a monetary overlapping generations economy1

Listed author(s):
  • Pingle, Mark
  • Tesfatsion, Leigh

This paper establishes that the pro�t-seeking activities of private intermediaries can ensure Pareto e�ciency in the standard pure-exchange monetary overlapping generations economy without the need for government monetary or �scal policy intervention. Moreover, these pro�t-seeking activities are shown to rule out all aperiodic and kperiodic cycles for k greater than 2. Contrary to much recent work on intermediation, the pro�t opportunities that arise for intermediaries in this context are not due to assumed frictions or asymmetric information. Rather, they are due to the dynamic open-ended structure of the economy, which permits debt roll-over. (C) 1998 Elsevier Science B.V. All rights reserved.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 22 (1998)
Issue (Month): 10 (August)
Pages: 1543-1574

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Handle: RePEc:eee:dyncon:v:22:y:1998:i:10:p:1543-1574
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  2. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. III. The case of log-linear utility functions," Journal of Economic Theory, Elsevier, vol. 24(1), pages 143-152, February.
  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. Abba P. Lerner, 1959. "Consumption-Loan Interest and Money," Journal of Political Economy, University of Chicago Press, vol. 67, pages 512-512.
  5. 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 467-467.
  6. Leigh TESFATSION, 1995. "How Economists Can Get Alife," Economic Report 37, Iowa State University Department of Economics.
  7. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  8. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  9. 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.
  10. 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.
  11. Abba P. Lerner, 1959. "Consumption-Loan Interest and Money: Rejoinder," Journal of Political Economy, University of Chicago Press, vol. 67, pages 523-523.
  12. Grandmont, Jean-Michel & Laroque, Guy, 1973. "Money in the pure consumption loan model," Journal of Economic Theory, Elsevier, vol. 6(4), pages 382-395, August.
  13. Fama, Eugene F., 1985. "What's different about banks?," Journal of Monetary Economics, Elsevier, vol. 15(1), pages 29-39, January.
  14. 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 938-945, September.
  15. John Bryant, 1980. "Bank collapse and depression," Staff Report 56, Federal Reserve Bank of Minneapolis.
  16. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
  17. Dean F. Amel & J. Nellie Liang, 1992. "A dynamic model of entry and performance in the U.S. banking industry," Finance and Economics Discussion Series 210, Board of Governors of the Federal Reserve System (U.S.).
  18. Williamson, Stephen D., 1992. "Laissez-faire banking and circulating media of exchange," Journal of Financial Intermediation, Elsevier, vol. 2(2), pages 134-167, June.
  19. Bhattacharya Sudipto & Thakor Anjan V., 1993. "Contemporary Banking Theory," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 2-50, October.
  20. Pingle, M. & Tesfatsion, Leigh S., 1991. "Overlapping Generations, Intermediation, and the First Welfare Theorem," Staff General Research Papers Archive 11185, Iowa State University, Department of Economics.
  21. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-1011, Sept.-Oct.
  22. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
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