Monetary Equilibria over an Infinite Horizon
Jacques Dreze and
H. M. Polemarchakis
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H. M. Polemarchakis: Brown University
No 03-19, Discussion Papers from University of Copenhagen. Department of Economics
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. A public authority, inheriting a strictly positive public debt, raises revenue from taxes and seignorage. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a nontrivial 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)
JEL-codes: D50 E40 E50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
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Journal Article: Monetary equilibria over an infinite horizon (2005)
Working Paper: Monetary equilibria over an infinite horizon (2005)
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