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Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt

  • Pingle, M.
  • Tesfatsion, Leigh S.

"Active Intermediation in a Monetary Overlapping Generations Economy" ( ps,297K) ( pdf,600K ), (with M. Pingle), Economic Report No. 42, Iowa State University, April 1997. Final version appears in Macroeconomic Dynamics 2 (1998), pp. 183--212. Abstract: This study demonstrates that the reason for the failure of the first welfare theorem in the overlapping generations model with production and unsecured debt by Tirole (Econometrica, 1985) is that intermediation is modelled as a purely passive coordination activity implemented by a Walrasian Auctioneer. When intermediation is instead modelled as a contestable activity carried out by a corporate intermediary owned by consumer-shareholders and operated in their interest, every equilibrium is Pareto efficient.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 1228.

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Date of creation: 01 Jan 1998
Date of revision:
Publication status: Published in Macroeconomic Dynamics 1998, vol. 2, pp. 183-212
Handle: RePEc:isu:genres:1228
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Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

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  1. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  2. John Bryant, 1980. "Bank collapse and depression," Staff Report 56, Federal Reserve Bank of Minneapolis.
  3. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-11, Sept.-Oct.
  4. Pingle, Mark & Tesfatsion, Leigh S., 1998. "Active Intermediation in a Monetary Overlapping Generations Economy," Staff General Research Papers Archive 1954, Iowa State University, Department of Economics.
  5. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
  6. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
  7. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
  8. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  9. Pingle, Mark & Tesfatsion, Leigh, 1998. "Active intermediation in a monetary overlapping generations economy1," Journal of Economic Dynamics and Control, Elsevier, vol. 22(10), pages 1543-1574, August.
  10. David Cass & Menahem E. Yaari, 1965. "A Re-Examination of the Pure Consumption Loans Model," Cowles Foundation Discussion Papers 195, Cowles Foundation for Research in Economics, Yale University.
  11. Leigh TESFATSION, 1995. "How Economists Can Get Alife," Economic Report 37, Iowa State University Department of Economics.
  12. Bennett T. McCallum, 1986. "The Optimal Inflation Rate in an Overlapping-Generations Economy with Land," NBER Working Papers 1892, National Bureau of Economic Research, Inc.
  13. Pingle, M. & Tesfatsion, Leigh S., 1991. "Overlapping Generations, Intermediation, and the First Welfare Theorem," Staff General Research Papers Archive 11185, Iowa State University, Department of Economics.
  14. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, vol. 81(4), pages 938-45, September.
  15. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  16. Grandmont, Jean-Michel & Laroque, Guy, 1973. "Money in the pure consumption loan model," Journal of Economic Theory, Elsevier, vol. 6(4), pages 382-395, August.
  17. Balasko, Yves & Shell, Karl, 1981. "The overlapping-generations model. II. The case of pure exchange with money," Journal of Economic Theory, Elsevier, vol. 24(1), pages 112-142, February.
  18. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
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