leadership meets soft budget
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.
|Date of creation:||Dec 2005|
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- Mathias Dewatripont & Gérard Roland, 2000. "Soft budget constraints, transaction and financial systems," ULB Institutional Repository 2013/9625, ULB -- Universite Libre de Bruxelles.
- 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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