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Monetary equilibria and Knightian uncertainty

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  • Eisei Ohtaki
  • Hiroyuki Ozaki

Abstract

This article considers a pure-endowment stationary stochastic overlapping generations economy, in which agents have maxmin expected utility preferences. Two main results are obtained. First, we show that multiple stationary monetary equilibria exist. Consequently, real and price indeterminacies arise under the assumption that aggregate shock exists. Second, we show that each of these stationary monetary equilibria is conditionally Pareto optimal, i.e., no other stationary allocations strictly Pareto dominate the equilibrium allocations. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Eisei Ohtaki & Hiroyuki Ozaki, 2015. "Monetary equilibria and Knightian uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 435-459, August.
  • Handle: RePEc:spr:joecth:v:59:y:2015:i:3:p:435-459
    DOI: 10.1007/s00199-015-0887-6
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    Cited by:

    1. Kiyohiko G. Nishimura & Hiroyuki Ozaki S, 2014. "Multi-Belief Rational-Expectations Equilibria: Indeterminacy, Complexity And Sustained Deflation," CARF F-Series CARF-F-354, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Eisei Ohtaki, 2020. "Optimality in an OLG model with nonsmooth preferences," Working Papers e145, Tokyo Center for Economic Research.
    3. José Faro, 2013. "Cobb-Douglas preferences under uncertainty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(2), pages 273-285, October.
    4. Eisei Ohtaki & Hiroyuki Ozaki, 2014. "Optimality in a Stochastic OLG Model with Ambiguity," Working Papers e069, Tokyo Center for Economic Research.
    5. Luciano I. Castro & Zhiwei Liu & Nicholas C. Yannelis, 2017. "Ambiguous implementation: the partition model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(1), pages 233-261, January.
    6. Ohtaki, Eisei, 2014. "Tractable graphical device for analyzing stationary stochastic OLG economies," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 16-26.
    7. Eisei Ohtaki, 2016. "Optimality of the Friedman rule under ambiguity," Working Papers e103, Tokyo Center for Economic Research.
    8. Patrick Beissner, 2017. "Equilibrium prices and trade under ambiguous volatility," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(2), pages 213-238, August.
    9. Kiyohiko G. Nishimura & Hiroyuki Ozaki, 2014. "Multi-Belief Rational-Expectations Equilibria:Indeterminacy, Complexity And Sustained Deflation," UTokyo Price Project Working Paper Series 040, University of Tokyo, Graduate School of Economics.

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    More about this item

    Keywords

    Money; Maxmin expected utility; Conditional Pareto optimality; Indeterminacy; Stochastic overlapping generations model; E40; D81; D50; D61;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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