A note on the existence of monetary equilibria in overlapping generations models with storage (Q800810): Difference between revisions

Wallace's result for an overlapping generations (OG) model with nonstochastic storage [see \textit{N. Wallace}, ''The overlapping generations model of fiat money'', in: Models of Monetary Economies, J. Kareken and N. Wallace (eds.), Fed. Res. Bank of Minneapolis, 49-82 (1980)] is extended, by provision of a necessary and sufficient condition for fiat currency to be valued in equilibrium in an OG model with stochastic storage. It is shown that a monetary equilibrium exists if and only if the real rate of return on currency that would obtain in the stationary monetary equilibrium exceeds the risk-free real rate of return that obtains in the nonmonetary equilibrium.