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Monetary Equilibria and Knightian Uncertainty

  • Eisei Ohtaki

    (Faculty of Economics, Keio University)

  • Hiroyuki Ozaki

    (Faculty of Economics, Keio University)

This article considers a pure-endowment stationary stochastic overlapping generations economy, in which agents have maximin expected utility preferences. Two main results are obtained. First, we show that multiple stationary monetary equilibria exist, and hence real as well as price indeterminacy arises under the assumption that aggregate shock exists. Second, we show that each of these stationary monetary equilibria is conditionally Pareto optimal; i.e., no other stationary allocations strictly Pareto dominate the equilibrium allocations.

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Paper provided by Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2012-032.

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Length: 24 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:kei:dpaper:2012-032
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