Monetary equilibria over an infinite horizon
Jacques Dreze and
Herakles Polemarchakis ()
Economic Theory, 2005, vol. 25, issue 1, 51-74
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. Copyright Springer-Verlag Berlin/Heidelberg 2005
Keywords: Money; Equilibrium; Indeterminacy; Monetary policy; Fiscal policy. (search for similar items in EconPapers)
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Working Paper: Monetary equilibria over an infinite horizon (2005)
Working Paper: Monetary Equilibria over an Infinite Horizon (2003)
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