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Indeterminacy and Cycles in a Cash-in-Advance Economy with Production

Author

Listed:
  • Gaetano Bloise

    (CORE, Université Catholique de Louvain)

  • Stefano Bosi

    (EPEE, Université d’Evry-Val d’Essonne)

  • Francesco Magris

    (DAE, University of Cambridge, and DISES, University of Trieste)

Abstract

In this paper we study the determinacy of price level, nominal and real interest rate and income, in an economy with productive capital and cash-in-advance constraint on consumption purchases. In particular, we show that under mild assumptions on preferences and production sets there may arise a continuum of equilibria converging to the unique stationary solution, which is therefore locally indeterminate, as well as deterministic cycles. Similar results are observed when sustained growth, in view of the presence of aggregate externalities in capital utilization, is accounted for.

Suggested Citation

  • Gaetano Bloise & Stefano Bosi & Francesco Magris, 1999. "Indeterminacy and Cycles in a Cash-in-Advance Economy with Production," Documents de recherche 99-06, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  • Handle: RePEc:eve:wpaper:99-06
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    Cited by:

    1. Antoine Riche & Francesco Magris, 2017. "Equilibrium Dynamics in a Two-Sector OLG Model with Liquidity Constraint," Studies in Economic Theory, in: Kazuo Nishimura & Alain Venditti & Nicholas C. Yannelis (ed.), Sunspots and Non-Linear Dynamics, chapter 0, pages 147-174, Springer.

    More about this item

    Keywords

    cash-in-advance; indeterminacy; growth;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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