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Money and Indeterminacy 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 complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances. Competitive equilibria exist. 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-artibrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2002-12.

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Date of creation: 2002
Date of revision:
Handle: RePEc:bro:econwp:2002-12
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Department of Economics, Brown University, Providence, RI 02912

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