Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets

Ingolf Schwarz () and Jinhui Bai
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Ingolf Schwarz: Max-Planck-Institute for Research on Collective Goods

No 2005_18, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: The general equilibrium model with incomplete financial markets (GEI) is extended by adding fiat money, fiscal and monetary policy and a cash-in-advance constraint. The central bank either pegs the interest rate or money supply while the fiscal authority sets a Ricardian or a non-Ricardian fiscal plan. We prove the existence of equilibria in all four scenarios. In Ricardian economies, the conditions required for existence are not more restrictive than in standard GEI. In non-Ricardian economies, the sufficient conditions for existence are more demanding. In the Ricardian economy, neither the price level nor the equivalent martingale measure are determinate.

Keywords: Money; Incomplete Markets; Fiscal Policy; Indeterminacy (search for similar items in EconPapers)
JEL-codes: D52 E40 E50 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2005-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fmk, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Monetary equilibria in a cash-in-advance economy with incomplete financial markets (2006)
Working Paper: Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets (2006)
Working Paper: Monetary Equilibria in a Cash-in-Advance Economy with Incomplete Financial Markets (2005)
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