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leadership meets soft budget

  • Nobuo Akai

    (School of Business administration, University of Hyogo)

  • Motohiro Sato

    (Hitotsubashi School of International and the Public Policy)

In this paper, it is shown that real indeterminacy of stationary equilibria generically arises in most matching models with perfectly divisible fiat money. In other words, the real indeterminacy follows from the condition for stationarity of money holdings, and surprisingly it has nothing to do with the other specifications, e.g., the bargaining procedures, of the models. Thus if we assume the divisibility of money in money search models, it becomes quite difficult to make accurate predictions of the effects of some policies.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2005/2005cf391.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-391.

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Length: 58 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:tky:fseres:2005cf391
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  1. Boadway, R & Keen, M, 1996. "Efficiency and the optimal direction of federal-state transfers," IFS Working Papers W96/01, Institute for Fiscal Studies.
  2. Kothenburger, Marko, 2004. "Tax competition in a fiscal union with decentralized leadership," Journal of Urban Economics, Elsevier, vol. 55(3), pages 498-513, May.
  3. J�nos Kornai & Eric Maskin & G�rard Roland, 2003. "Understanding the Soft Budget Constraint," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1095-1136, December.
  4. Joel Slemrod & Wojciech Kopczuk, 2000. "The Optimal Elasticity of Taxable Income," NBER Working Papers 7922, National Bureau of Economic Research, Inc.
  5. Jorge Martinez-Vasquez & Jameson Boex, 2001. "Russia's Transition to a New Federalism," World Bank Publications, The World Bank, number 15248.
  6. Mathias Dewatripont & Gérard Roland, 2000. "Soft budget constraints, transaction and financial systems," ULB Institutional Repository 2013/9625, ULB -- Universite Libre de Bruxelles.
  7. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
  8. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
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