Jacques Dreze and
No 2000044, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)
The introduction of banks that issue money and supply balances and pay out their profis as dividends is the natural modification of the model of general competitive equilibrium that encompasses monetary economies with an operative transactions technology. Monetary policy sets nominal rates of interest and accommodates the demand for balances; alternatively, it sets the supply of balances and rates of interest adjust for money markets to clear. Competitive equilibria exist. Under uncertainty, monetary policy fails to determine the distribution of the rate of inflation or the allocation of resources at equilibrium. If, in addition to rates of interest, monetary policy sets the prices of contingent loans subject to no-arbitrage constraints, or targets the distribution of the terminal level of prices, it lifts the multiplicity.
Keywords: money; equilibrium; monetary policy. (search for similar items in EconPapers)
JEL-codes: D50 E40 E50 (search for similar items in EconPapers)
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Working Paper: Monetary equilibria (2001)
Working Paper: Monetary equilibria (1995)
Working Paper: Monetary Equilibria (1995)
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