Decreasing Transaction Costs and Endogenous Fluctuations in a Monetary Model

Antoine Le Riche () and Francesco Magris
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Antoine Le Riche: GAINS, Aix-Marseille University (Aix-Marseille School of Economics), GREQAM, CNRS & EHESS, http://www.amse-aixmarseille.fr/en/users/le-riche#profile-membres

No 1535, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We study an infinite horizon economy with a representative agent whose utility function includes consumption, real balances and leisure. Real balances enter the utility function pre-multiplied by a parameter reflecting the inverse of the degree of financial market imperfection, i.e. the inverse of the transaction costs justifying the introduction of money in the utility function. When labor is supplied elastically, indeterminacy arises through a transcritical and a flip bifurcation, for degree of financial imperfection arbitrarily close to zero. Similar results are observed when labor is supplied inelastically: indeterminacy occurs through a flip bifurcation for values of the degree of financial imperfection unbounded away from zero. We also study the existence and the multiplicity of the steady states.

Keywords: bifurcations; Indeterminacy; market imperfections; money demand (search for similar items in EconPapers)
Pages: 21 pages
Date: 2015-09-11
New Economics Papers: this item is included in nep-mac, nep-mon and nep-upt
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Related works:
Journal Article: Decreasing Transaction Costs and Endogenous Fluctuations in a Monetary Model (2016)
Working Paper: Decreasing Transaction Costs and Endogenous Fluctuations in a Monetary Model (2016)
Working Paper: Decreasing Transaction Costs and Endogenous Fluctuations in a Monetary Model (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1535

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