Monetary Equilibria over an Infinite Horizon

Gaetano Bloise, Jacques Dreze and Herakles M. Polemarchakis ()
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Herakles M. Polemarchakis: Brown University

Chapter 5 in Institutions, Equilibria and Efficiency, 2006, pp 69-93 from Springer

Abstract: Summary Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances through open market operations or loans. A public authority, which, most pertinently, inherits a strictly positive public debt, raises revenue from taxes and seignorage, and it distributes possible budget surpluses to individuals through transfers. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a non-trivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.

Keywords: Money; Equilibrium; Indeterminacy; Monetary policy; Fiscal policy (search for similar items in EconPapers)
Date: 2006
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Related works:
Journal Article: Monetary equilibria over an infinite horizon (2005)
Working Paper: Monetary equilibria over an infinite horizon (2005)
Working Paper: Monetary Equilibria over an Infinite Horizon (2003)
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DOI: 10.1007/3-540-28161-4_5

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