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Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt

Author

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  • Pingle, M.
  • Tesfatsion, Leigh S.

Abstract

"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.

Suggested Citation

  • Pingle, M. & Tesfatsion, Leigh S., 1998. "Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt," Staff General Research Papers Archive 1228, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:1228
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    References listed on IDEAS

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    1. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    2. 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.
    3. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    4. 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.
    5. Kalaba, Robert & Tesfatsion, Leigh, 1996. "A multicriteria approach to model specification and estimation," Computational Statistics & Data Analysis, Elsevier, vol. 21(2), pages 193-214, February.
    6. 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.
    7. Shell, Karl, 1971. "Notes on the Economics of Infinity," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1002-1011, Sept.-Oct.
    8. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    9. 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 467-467.
    10. Leigh TESFATSION, 1995. "How Economists Can Get Alife," Economic Report 37, Iowa State University Department of Economics.
    11. 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.
    12. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    13. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    14. Dean F. Amel & J. Nellie Liang, 1992. "A dynamic model of entry and performance in the U.S. banking industry," Finance and Economics Discussion Series 210, Board of Governors of the Federal Reserve System (U.S.).
    15. David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, pages 353-353.
    16. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2016. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9781316508671, December.
    17. Pingle, Mark & Tesfatsion, Leigh, 1991. "Overlapping generations, intermediation, and the First Welfare Theorem," Journal of Economic Behavior & Organization, Elsevier, vol. 15(3), pages 325-345, May.
    18. Mark Pingle & Leigh Tesfatsion, 1993. "``Active Intermediation in a Monetary Overlapping Generations Economy''," Macroeconomics 9312001, EconWPA, revised 04 Dec 1993.
    19. Bryant, John, 1981. "Bank Collapse and Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 454-464, November.
    20. 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.
    21. Hannan, Timothy H & Berger, Allen N, 1991. "The Rigidity of Prices: Evidence from the Banking Industry," American Economic Review, American Economic Association, pages 938-945.
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    Cited by:

    1. Magill, Michael & Quinzii, Martine, 2003. "Nonshiftable capital, affine price expectations and convergence to the Golden Rule," Journal of Mathematical Economics, Elsevier, vol. 39(3-4), pages 239-272, June.
    2. Michael Magill & Martine Quinzii, "undated". "The Stock Market in the Overlapping Generations," Department of Economics 99-13, California Davis - Department of Economics.
    3. Tesfatsion, Leigh, 2006. "Agent-Based Computational Modeling And Macroeconomics," Staff General Research Papers Archive 12402, Iowa State University, Department of Economics.
    4. Michael Magill & Martine Quinzii, "undated". "The Stock Market in the Overlapping Generations," Department of Economics 99-13, California Davis - Department of Economics.
    5. Kim, Jae Kyeong, 1997. "Social security trust fund (SSTF), the government fiscal use of the SSTF, and intergenerational equity," ISU General Staff Papers 1997010108000012996, Iowa State University, Department of Economics.

    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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