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Monetary Equilibria

Author

Listed:
  • Heracles M. Polemarchakis

    (Department of Economics [Providence] - Brown University, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain)

  • Jacques H. Drèze

    (CORE - UCL - Université Catholique de Louvain = Catholic University of Louvain)

Abstract

The introduction of banks that issue money and supply balances and pay out their profis as dividends is the natural modification of the model of general competitive equilibrium that encompasses monetary economies with an operative transactions technology. Monetary policy sets nominal rates of interest and accommodates the demand for balances; alternatively, it sets the supply of balances and rates of interest adjust for money markets to clear. Competitive equilibria exist. Under uncertainty, monetary policy fails to determine the distribution of the rate of inflation or the allocation of resources at equilibrium. If, in addition to rates of interest, monetary policy sets the prices of contingent loans subject to no-arbitrage constraints, or targets the distribution of the terminal level of prices, it lifts the multiplicity.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Heracles M. Polemarchakis & Jacques H. Drèze, 1995. "Monetary Equilibria," Working Papers hal-00607521, HAL.
    • Handle: RePEc:hal:wpaper:hal-00607521
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    Cited by:

    1. Gourdel & Triki, 2005. "Monetary Policy with Incomplete Markets," Finance 0503026, University Library of Munich, Germany.
    2. Bai, Jinhui H. & Schwarz, Ingolf, 2006. "Monetary equilibria in a cash-in-advance economy with incomplete financial markets," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 422-451, August.
    3. Andreas Schabert, 2004. "On the relevance of open market operations for the short-run effects of monetary policy," Money Macro and Finance (MMF) Research Group Conference 2003 83, Money Macro and Finance Research Group.
    4. Marimon, Ramon & Nicolini, Juan Pablo & Teles, Pedro, 2003. "Inside-outside money competition," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1701-1718, November.
    5. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
    6. Ingolf Schwarz, 2006. "Monetary Equilibria in a Baumol-Tobin Economy," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2006_15, Max Planck Institute for Behavioral Economics.
    7. Bloise, Gaetano, 2006. "Money, gains to trade and impatience," Research in Economics, Elsevier, vol. 60(1), pages 22-34, March.
    8. Schabert, Andreas, 2005. "Identifying monetary policy shocks with changes in open market operations," European Economic Review, Elsevier, vol. 49(3), pages 561-577, April.
    9. McMahon, Michael & Peiris, M. Udara & Polemarchakis, Herakles, 2018. "Perils of unconventional monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 93(C), pages 92-114.
    10. Dimitrios P. Tsomocos, 2012. "Equilibrium Analysis, Banking and Financial Instability," Chapters, in: The Challenge of Financial Stability, chapter 4, pages 61-97, Edward Elgar Publishing.
    11. 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).
    12. Bernardino Adão & Pedro Teles, 2004. "Monetary Policy with State Contingent Interest Rates," Working Papers w200418, Banco de Portugal, Economics and Research Department.
    13. Pascal Gourdel & Leila Triki, 2005. "Incomplete markets and monetary policy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00193970, HAL.

    More about this item

    Keywords

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    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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