Money and Production, and Liquidity Trap
We prove the existence of monetary equilibrium in a finite horizon economy with production. We also show that if agents expect the monetary authority to significantly decrease the supply of bank money available for short term loans in the future, then the economy will fall into a liquidity trap today.
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References listed on IDEAS
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- Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 137-206.
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- Robert E. Lucas Jr. & Nancy L. Stokey, 1984. "Money and Interest in Cash-In-Advance Economy," Discussion Papers 628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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- Bryce Hool, 1976. "Money, Expectations and the Existence of a Temporary Equilibrium," Review of Economic Studies, Oxford University Press, vol. 43(3), pages 439-445. Full references (including those not matched with items on IDEAS)
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