Monetary Equilibria over an Infinite Horizon
Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances. A public authority, inheriting a strictly positive public debt, raises revenue from taxes and seignorage. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a nontrivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.
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- 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.
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Discussion Paper Serie A
384, University of Bonn, Germany.
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- Magill, M. & Quinzii, M., 1992. "Infinite Horizon Incomplete Markets," DELTA Working Papers 92-26, DELTA (Ecole normale supérieure).
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- G. Bloise & J.H. Dreze & H.M. Polemarchakis, 2002.
"Money and Indeterminacy Over an Infinite Horizon,"
2002-12, Brown University, Department of Economics.
- Magill, M. & Quinzii, M., 1988.
"Real Effects Of Money In General Equilibrium,"
8826, Southern California - Department of Economics.
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