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On the disequilibrium dynamics of sequential monetary economies

Sander van der Hoog ()

Journal of Economic Behavior & Organization, 2008, vol. 68, issue 3-4, 525-552

Abstract: The purpose of this paper is to study the dynamic behavior of a sequential monetary exchange economy. Transactions take place sequentially against non-equilibrium prices, there is quantity rationing, and credit or cash are the only means of exchange. Agents have optimistic or pessimistic expectations about quantity constraints that represent their beliefs about future trading opportunities. In the credit model the agents incur debts along the transition path towards equilibrium, while in the cash-in-advance model convergence takes place without the occurrence of any debts or claims. The credit mechanism is shown to act as a 'soft' correction mechanism on credit fluctuations, while the cash-in-advance constraint acts as a 'hard' negative feedback effect driving the prices back towards a neighborhood of a monetary cash-in-advance equilibrium.

Keywords: Circular; exchange; Trading; posts; Effective; demand; Quantity; expectations; Moving-horizon; optimization (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:68:y:2008:i:3-4:p:525-552

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