Money, Credit, and Allocation Under Complete Dynamic Contracts and Incomplete Markets
S. Aiyagari and
Stephen Williamson ()
Game Theory and Information from EconWPA
We construct a dynamic heterogeneous-agent model with random uninsurable endowments. Two allocation mechanisms are considered, one with long-term complete credit arrangements under private information, and one with incomplete competitive markets. A role for money arises due to random limited participation. A Friedman rule is optimal in the first economy, and replicates a pure credit arrangement in the second. Computational results show that steady state allocations are quite different under the two arrangements, though the responses to changes in long-run inflation are similar.
Keywords: 97-20 (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Note: Type of Document - PDF; prepared on Acrobat PDF; pages: 43 ; figures: included
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Working Paper: Money, Credit, and Allocation Under Complete Dynamic Contracts and Incomplete Markets (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9802003
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