Global uniqueness and money non-neutrality in a Walrasian dynamics without rational expectations

Gaël Giraud and Dimitrios Tsomocos

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: We define a non-tâtonnement dynamics in continuous-time for pure-exchange economies with outside and inside fiat money. Traders are myopic, face a cash-in-advance constraint and play dominant strategies in a short-run monetary strategic market game involving the limit-price mechanism. The profits of the Bank are redistributed to its private shareholders, but they can use them to pay their own debts only in the next period. Provided there is enough inside money, monetary trade curves converge towards Pareto optimal allocations; money has a positive value along each trade curve, except on the optimal rest-point where it becomes a veil while trades vanish. Moreover, generically, given initial conditions, there is a piecewise globally unique trade-and-price curve not only in real, but also in nominal variables. Finally, money is locally neutral in the short-run and non-neutral in the long-run

Keywords: Bank; money; price-quantity dynamics; limit-price mechanism; inside money; outside money (search for similar items in EconPapers)
JEL-codes: D50 E40 E41 E50 E58 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2004-09
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Global Uniqueness and Money Non-neutrality in a Walrasian Dynamics without Rational Expectations (2004)
Working Paper: Global Uniqueness and Money Non-neutrality in a Walrasian Dynamics without Rational Expectations (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:b04121

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