Money, banks and endogenous volatility
In this paper I consider a monetary growth model in which banks provide liquidity, and the government fixes a constant rate of money creation. There are two underlying assets in the economy, money and capital. Money is dominated in rate of return. In contrast to other papers with a larger set of government liabilities, I find a unique equilibrium when agents' risk aversion is moderate. However, indeterminacies and endogenous volatility can be observed when agents are relatively risk averse.
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Volume (Year): 15 (2000)
Issue (Month): 3 ()
|Note:||Received: March 11, 1999; revised version: March 30, 1999|
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