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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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  2. 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.
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  7. Heracles M. Polemarchakis & Jacques H. Drèze, 1995. "Monetary Equilibria," Working Papers hal-00607521, HAL.
  8. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(3), pages 345-80.
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  16. 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.
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  18. David K. Levine & William R. Zame, 1992. "Debt Constraints and Equilibrium in Infinite Horizon Economies with Incomplete Markets," UCLA Economics Working Papers 666, UCLA Department of Economics.
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