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Fiat money and the value of binding portfolio constraints

Mario Pascoa, Myrian Petrassi and Juan Pablo Torres-Martinez ()

Working Papers from University of Chile, Department of Economics

Abstract: It is well known that, under uniform impatience, positive net supply assets are free of bubbles for non-arbitrage kernel deflators that yield finite present values of wealth. However, this does not mean that prices cannot be above the series of deflated dividends for the deflators given by the agents' marginal rates of substitution, which also yield finite present values of wealth. In particular, binding no-short-sales constraints lead to positive prices of fiat money. Also, monetary equilibria are Pareto improvements but they are still inefficient.

Keywords: Binding debt constrains; Fundamental value of money; Asset pricing bubbles. (search for similar items in EconPapers)
JEL-codes: D50 D52 (search for similar items in EconPapers)
Date: 2008-07
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Related works:
Journal Article: Fiat money and the value of binding portfolio constraints (2011) Downloads
Working Paper: Fiat Money and the Value of Binding Portfolio Constraints (2009) Downloads
Working Paper: Fiat money and the value of binding portfolio constraints (2009) Downloads
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