``Active Intermediation in a Monetary Overlapping Generations Economy''

Mark Pingle () and Leigh Tesfatsion ()

Macroeconomics from EconWPA

Abstract: It is now widely believed that government intervention is essential to ensure Pareto efficiency in the standard overlapping generations economy with nonaltruistic agents. This paper argues that the normal profit-seeking activities of {\it private intermediaries\/}---missing from the standard overlapping generations economy---would tend to eliminate the need for such government intervention. A private earnings-driven corporate intermediary is introduced into a standard monetary overlapping generations economy which, in the absence of the intermediary, generates Pareto inefficient equilibria. The intermediary issues unsecured corporate debt and maximizes its market value in direct accordance with the interests of its successive shareholders. The significant impact of private intermediation is demonstrated by establishing that all equilibria for the resulting ``Corporate Economy'' are Pareto efficient. Dynamic properties of equilibrium paths are also determined. It is shown, for example, that endogenous cyclic equilibria are possible for the Corporate Economy in the absence of gross substitutability.

JEL-codes: E (search for similar items in EconPapers)
Date: 1993-12-04
Note: 32 Pages of Text, Plus a Ten Page Appendix and Two Figures, all in ONE LaTeX file
View list of references

Downloads: (external link)
http://129.3.20.41/eps/mac/papers/9312/9312001.tex (application/x-tex)
http://129.3.20.41/eps/mac/papers/9312/9312001.pdf (application/pdf)
http://129.3.20.41/eps/mac/papers/9312/9312001.ps.gz (application/postscript)

Related works:
Working Paper: Active Intermediation in a Monetary Overlapping Generations Economy (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Macroeconomics from EconWPA
Series data maintained by EconWPA ().