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On the disequilibrium dynamics of sequential monetary economies

  • van der Hoog, Sander

The purpose of this paper is to study the dynamic behavior of a sequential monetary exchange economy. Transactions take place sequentially against non-equilibrium prices, there is quantity rationing, and credit or cash are the only means of exchange. Agents have optimistic or pessimistic expectations about quantity constraints that represent their beliefs about future trading opportunities. In the credit model the agents incur debts along the transition path towards equilibrium, while in the cash-in-advance model convergence takes place without the occurrence of any debts or claims. The credit mechanism is shown to act as a 'soft' correction mechanism on credit fluctuations, while the cash-in-advance constraint acts as a 'hard' negative feedback effect driving the prices back towards a neighborhood of a monetary cash-in-advance equilibrium.

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File URL: http://www.sciencedirect.com/science/article/B6V8F-4SWWT0H-2/2/4a740d1c41d2e012551aab68cc194101
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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 68 (2008)
Issue (Month): 3-4 (December)
Pages: 525-552

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Handle: RePEc:eee:jeborg:v:68:y:2008:i:3-4:p:525-552
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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  1. Clower, Robert & Leijonhufvud, Axel, 1975. "The Coordination of Economic Activities: A Keynesian Perspective," American Economic Review, American Economic Association, vol. 65(2), pages 182-88, May.
  2. Zappia, Carlo, 2001. "Equilibrium and Disequilibrium Dynamics in the 1930s," Journal of the History of Economic Thought, Cambridge University Press, vol. 23(01), pages 55-75, March.
  3. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  4. Weddepohl, Claus, 1995. "A cautious price adjustment mechanism: Chaotic behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 27(2), pages 293-300, July.
  5. Robert Axtell, 2005. "The Complexity of Exchange," Economic Journal, Royal Economic Society, vol. 115(504), pages F193-F210, 06.
  6. Benassy Jean-pascal, 1974. "Neokeynesian disequilibrium theory in a monetary economy," CEPREMAP Working Papers (Couverture Orange) 7402, CEPREMAP.
  7. Saari, Donald G, 1985. "Iterative Price Mechanisms," Econometrica, Econometric Society, vol. 53(5), pages 1117-31, September.
  8. Robert L. Axtell, 2000. "Effect of Interaction Topology and Activation Regime in Several Multi-Agent Systems," Working Papers 00-07-039, Santa Fe Institute.
  9. Green, Jerry, 1980. "On the Theory of Effective Demand," Economic Journal, Royal Economic Society, vol. 90(358), pages 341-53, June.
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