Money, Wealth and Overlapping Generations
In this paper, we use Weil's (1989) overlapping dynasties framework to analyse a microfounded version of the real balance effect envisaged by Pigou (1944). The effect is absent from representative agent models as then net monetary wealth is always zero. With population growth, however, net monetary wealth is positive and a real balance effect emerges much as Pigou predicted. Our main conclusion, however, is a Keynesian one: rather than eliminating the possibility of a trap, the framework generating the real balance effect if anything makes a trap more likely due to the heightened constraints it imposes on the monetary authority.
|Date of creation:||04 Jun 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 1334 462479
Web page: http://www.res.org.uk/society/annualconf.asp
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ecj:ac2003:2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.