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Real Indeterminacy of Stationary Monetary Equilibria in Centralized Economies

Kazuya Kamiya, So Kubota and Kayuna Nakajima
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Kazuya Kamiya: Kobe University
So Kubota: Princeton University
Kayuna Nakajima: Bates White, LLC

The Japanese Economic Review, 2017, vol. 68, issue 4, No 5, 497-520

Abstract: Abstract We show that real indeterminacy of stationary equilibria, by which the set of stationary equilibria is a continuum and the real allocation varies among equilibria, may arise in some general equilibrium models with fiat money. The conditions under which such equilibria arise are: (i) each household optimally saves a constant amount of money; and (ii) at least two households face different budget constraints. We present various models, including a decentralized money search model and a centralized model with a monopoly firm, to explain how these conditions lead to real indeterminacy. Finally, we present a policy that uniquely implements any desirable outcome.

Keywords: D51; E40 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1111/jere.12145

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