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Money and indeterminacy over an infinite horizon

  • BLOISE, Gaetano
  • DRÈZE, Jacques
  • POLEMARCHAKIS, Heracles

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 Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2002021.

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Date of creation: 00 Apr 2002
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Handle: RePEc:cor:louvco:2002021
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  1. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 345-80.
  2. Monique Florenzano & Pascal Gourdel, 1996. "Incomplete Markets In Infinite Horizon: Debt Constraints Versus Node Prices," Mathematical Finance, Wiley Blackwell, vol. 6(2), pages 167-196.
  3. Levine, David K. & Zame, William R., 1996. "Debt constraints and equilibrium in infinite horizon economies with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 103-131.
  4. Tomoyuki Nakajima & Herakles Polemarchakis, 2005. "Money and Prices Under Uncertainty," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 223-246.
  5. BLOISE, Gaetano & DREZE, Jacques H. & POLEMARCHAKIS, Herakles M., . "Monetary equilibria over an infinite horizon," CORE Discussion Papers RP 1750, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Kevin X. D. Huang & Jan Werner, 2000. "Implementing Arrow-Debreu Equilibria by Trading Infinitely-Lived Securities," Econometric Society World Congress 2000 Contributed Papers 1708, Econometric Society.
  7. Magill, Michael & Quinzii, Martine, 1994. "Infinite Horizon Incomplete Markets," Econometrica, Econometric Society, vol. 62(4), pages 853-80, July.
  8. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April.
  9. John H. Cochrane, 1998. "Long-term Debt and Optimal Policy in the Fiscal Theory of the Price Level," CRSP working papers 478, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. DREZE, Jacques & POLEMARCHAKIS, Heracles, 1995. "Monetary equilibria," CORE Discussion Papers 1995078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. 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.
  12. Manuel S. Santos & Michael Woodford, 1997. "Rational Asset Pricing Bubbles," Econometrica, Econometric Society, vol. 65(1), pages 19-58, January.
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  14. Bewley, Truman F., 1972. "Existence of equilibria in economies with infinitely many commodities," Journal of Economic Theory, Elsevier, vol. 4(3), pages 514-540, June.
  15. Chiappori, P.A. & Guesnerie, R., 1993. "Rational Random Walks," DELTA Working Papers 93-07, DELTA (Ecole normale supérieure).
  16. Jean-Michel Grandmont & Yves Younes, 1972. "On the Role of Money and the Existence of a Monetary Equilibrium," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 355-372.
  17. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  18. Max Blouin, 2000. "Overlapping Generations of Cars," Cahiers de recherche CREFE / CREFE Working Papers 117, CREFE, Université du Québec à Montréal.
  19. Hernandez D., Alejandro & Santos, Manuel S., 1996. "Competitive Equilibria for Infinite-Horizon Economies with Incomplete Markets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 102-130, October.
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