On the Micro-Dynamics of a Cash-in-Advance Economy
The purpose of this paper is to develop a general equilibrium model with money and trade taking place outside of equilibrium. There are multiple markets which are visited sequentially by the agents and transactions occur at disequilibrium prices along the adjustment path. This implies quantity rationing and we assume that there is a cash-in-advance constraint which limits the agents' ability to transact. The updating of the prices and cash balances makes it necessary for agents to re-optimize their trading plans subject to new information due to substitution and spill-over effects. The dynamics of this disequilibrium price and quantity process are shown to depend crucially on the exchange mechanisms that are imposed. One of the results is that the introduction of a cash-in-advance constraint, although it prevents debts from occurring outside of equilibrium, does not stabilize endogenous fluctuations.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: Dept. of Economics and Econometrics, Universiteit van Amsterdam, Roetersstraat 11, NL - 1018 WB Amsterdam, The Netherlands|
Phone: + 31 20 525 52 58
Fax: + 31 20 525 52 83
Web page: http://www.fee.uva.nl/cendef/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- DREZE, Jacques H., .
"Existence of an exchange equilibrium under price rigidites,"
CORE Discussion Papers RP
225, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dreze, Jacques H, 1975. "Existence of an Exchange Equilibrium under Price Rigidities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(2), pages 301-20, June.
- Gode, Dhananjay K & Sunder, Shyam, 1993. "Allocative Efficiency of Markets with Zero-Intelligence Traders: Market as a Partial Substitute for Individual Rationality," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 119-37, February.
- Amendola, Mario & Gaffard, Jean-Luc, 1998.
"Out of Equilibrium,"
Oxford University Press, number 9780198293804, December.
- Jacques H.DREZE, 2001.
"On the Macroeconomics of Uncertainty and Incomplete Markets,"
Discussion Papers (REL - Recherches Economiques de Louvain)
2001011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- DREZE, Jacques, 1999. "On the macroeconomics of uncertainty and incomplete markets," CORE Discussion Papers 1999064, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- DRÈZE, Jacques H., . "On the macroeconomics of uncertainty and incomplete markets," CORE Discussion Papers RP 1510, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Clower, Robert W, 1977. "The Anatomy of Monetary Theory," American Economic Review, American Economic Association, vol. 67(1), pages 206-12, February.
- Dhananjay K. Gode & Shyam Sunder, 1997. "What Makes Markets Allocationally Efficient?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 603-630.
- Y. Younes, 1975. "On the Role of Money in the Process of Exchange and the Existence of a Non-Walrasian Equilibrium," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 489-501.
- Goeree, Jacob K. & Hommes, Cars & Weddepohl, Claus, 1998. "Stability and complex dynamics in a discrete tatonnement model," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 395-410, January.
- 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.
- Martin Shubik, 2000.
"The Theory of Money,"
00-03-021, Santa Fe Institute.
- Svensson, Lars E O, 1981. " Effective Demand in a Sequence of Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 83(1), pages 1-21.
- Movshovich, Solomon M., 1994. "A price adjustment process in a rationed economy," Journal of Mathematical Economics, Elsevier, vol. 23(4), pages 305-321, July.
- Michael Magill & Martine Quinzii, 2002. "Theory of Incomplete Markets, Volume 1," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632543, March.
- Alessandro Citanna & Herve Cres & Antonio Villanacci, . "Underemployment of resources and self-fulfilling beliefs: Nonwalrasian allocations at walrasian prices," GSIA Working Papers 11, Carnegie Mellon University, Tepper School of Business.
When requesting a correction, please mention this item's handle: RePEc:ams:ndfwpp:04-12. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cees C.G. Diks)
If references are entirely missing, you can add them using this form.