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Active Intermediation in Overlapping Generations Economies with Production and Unsecured Debt

Author

Listed:
  • 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. 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.
    2. Mark Gertler, 1988. "Financial structure and aggregate economic activity: an overview," Proceedings, Federal Reserve Bank of Cleveland, pages 559-596.
    3. 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.
    4. 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..
    5. 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.
    6. Tesfatsion, Leigh, 1995. "How Economists Can Get Alife," Economic Reports 18196, Iowa State University, Department of Economics.
    7. 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.
    8. 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.
    9. Bryant, John, 1981. "Bank Collapse and Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 454-464, November.
    10. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    11. David Cass & Menahem E. Yaari, 1966. "A Re-examination of the Pure Consumption Loans Model," Journal of Political Economy, University of Chicago Press, vol. 74(4), pages 353-353.
    12. Mark Pingle & Leigh Tesfatsion, 1993. "``Active Intermediation in a Monetary Overlapping Generations Economy''," Macroeconomics 9312001, University Library of Munich, Germany, revised 04 Dec 1993.
    13. 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(6), pages 467-467.
    14. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
    15. 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.
    16. Abba P. Lerner, 1959. "Consumption-Loan Interest and Money: Rejoinder," Journal of Political Economy, University of Chicago Press, vol. 67(5), pages 523-523.
    17. Abba P. Lerner, 1959. "Consumption-Loan Interest and Money," Journal of Political Economy, University of Chicago Press, vol. 67(5), pages 512-512.
    18. 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 938-945, September.
    19. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
    20. 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.).
    21. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2016. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9781316508671.
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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. repec:isu:genstf:1997010108000012996 is not listed on IDEAS
    3. Tesfatsion, Leigh, 2006. "Agent-Based Computational Modeling and Macroeconomics," ISU General Staff Papers 200601010800001585, 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.

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    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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