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Multiple equilibria in two-sector monetary economies: an interplay between preferences and the timing for money


  • Stefano Bosi

    () (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Kazuo Nishimura

    () (Kyoto University [Kyoto])

  • Alain Venditti

    () (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)


In this paper, we study the occurrence of local indeterminacy in two-sector monetary economies. In order to capture the credit market imperfections and the liquidity services of money, we consider a general MIUF model with two alternative timings in monetary payments: the Cash-In-Advance timing, in which the cash available to buy goods is money in the consumers' hands after they leave the bond market but before they enter the goods market, and the Cash-After-the-Market timing, in which agents hold money for transactions after leaving the goods market. We consider three standard specifications of preferences: the additively separable formulation, the Greenwood-Hercovitz-Huffman (GHH) [18] formulation and the King-Plosser-Rebelo (KPR) [21] formulation. First, we show that for all the three types of preferences, local indeterminacy easily arises under the CIA timing with a low enough interest rate elasticity of money demand. Second, we show that with the CAM timing, determinacy always holds under separable preferences, but local indeterminacy can arise in the case of GHH and KPR preferences. We thus prove that compared to aggregate models, two-sector models provide new rooms for local indeterminacy when non-separable standard preferences are considered.

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  • Stefano Bosi & Kazuo Nishimura & Alain Venditti, 2009. "Multiple equilibria in two-sector monetary economies: an interplay between preferences and the timing for money," Working Papers halshs-00432258, HAL.
  • Handle: RePEc:hal:wpaper:halshs-00432258
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    References listed on IDEAS

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    Cited by:

    1. Maxime Menuet & Alexandru Minea & Patrick Villieu, 2015. "Deficit Rules and Monetization in a Growth Model with Multiplicity and Indeterminacy," Working Papers halshs-01199774, HAL.

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    Money-in-the-utility-function; Indeterminacy; Sunspot equilibria;

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