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Monetary equilibria over an infinite horizon

  • BLOISE, Gaetano
  • DREZE, Jacques H.
  • POLEMARCHAKIS, Herakles M.

Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances through open market operations or loans. A public authority, which, most pertinently, inherits a strictly positive public debt, raises revenue from taxes and seignorage, and it distributes possible budget surpluses to individuals through transfers. Competitive equilibria exist, under mild solvency conditions. 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-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://dx.doi.org/10.1007/s00199-004-0472-x
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 1750.

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Handle: RePEc:cor:louvrp:1750
Note: In : Economic Theory, 25, 51-74, 2005
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  1. Magill, Michael & Quinzii, Martine, 1994. "Infinite Horizon Incomplete Markets," Econometrica, Econometric Society, vol. 62(4), pages 853-80, July.
  2. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  3. BLOISE, Gaetano & DRÈZE, Jacques & POLEMARCHAKIS, Heracles, 2002. "Money and indeterminacy over an infinite horizon," CORE Discussion Papers 2002021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Magill, M. & Quinzii, M., 1992. "Real effects of money in general equilibrium," Journal of Mathematical Economics, Elsevier, vol. 21(4), pages 301-342.
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