Monetary equilibria over an infinite horizon
Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances through open market operations or loans. A public authority, which, most pertinently, inherits a strictly positive public debt, raises revenue from taxes and seignorage, and it distributes possible budget surpluses to individuals through transfers. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a non-trivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined. Copyright Springer-Verlag Berlin/Heidelberg 2005
Volume (Year): 25 (2005)
Issue (Month): 1 (01)
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- Magill, M. & Quinzii, M., 1992.
"Infinite Horizon Incomplete Markets,"
413a, California Davis - Institute of Governmental Affairs.
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8826, Southern California - Department of Economics.
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2002-12, Brown University, Department of Economics.
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