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.
|Date of creation:||Jul 2006|
|Publication status:||Published in International Journal of Economic Theory (2006), 2(3/4): 295-317|
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|Order Information:|| Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA|
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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Oxford University Press, vol. 42(2), pages 207-236.
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- Pradeep Dubey & John Geanakoplos, 2003.
"Monetary Equilibrium with Missing Markets,"
Cowles Foundation Discussion Papers
1389, Cowles Foundation for Research in Economics, Yale University.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1984.
"Money and Interest in Cash-In-Advance Economy,"
628, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
- 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.
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