Money, prices and interest rates in a non-aggregate stochastic general equilibrium model

Pedro Gutierrez

Applied Mathematical Finance, 2004, vol. 11, issue 4, 283-316

Abstract: This paper explores the relationships between money, prices, uncertainty and interest rates in a stochastic general equilibrium model. Taking a non-aggregate pure exchange economy with time and uncertainty as the starting point, money is introduced as a means to keep track of past transactions of goods and insurance services and as an instrument to settle debts. As a result, in this stochastic general equilibrium model the desire to hold money arises from the demand of goods and services, Arrow-Debreu securities, and assets. Since these sources of demand for money are strongly related to the economy output, the economy degree of uncertainty, and the interest rates, this paper provides not only an alternative framework to the traditional keynesian analysis of the liquidity preference, but also an extension of the cash-in-advance models for introducing money in a general equilibrium model.

Keywords: stochastic general equilibrium; demand for money; cash-in-advance model (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/13504860420000231911 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apmtfi:v:11:y:2004:i:4:p:283-316

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAMF20

DOI: 10.1080/13504860420000231911

Access Statistics for this article

Applied Mathematical Finance is currently edited by Professor Ben Hambly and Christoph Reisinger

More articles in Applied Mathematical Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().