Monetary equilibria

Research exposition (monographs, survey articles) pertaining to game theory, economics, and finance (91-02) General equilibrium theory (91B50) Macroeconomic theory (monetary models, models of taxation) (91B64)

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The authors consider an extension of the classical general equilibrium model of Arrow-Debreu-McKenzie which encompasses monetary economies. Namely, in addition to a production by firms and a consumption by individuals the extended model allow banks to act as agents which issue money, supply balances and pay out their profits as dividends. The monetary economy in this papers is described under the ``cash-in-advance constraint on transactions technology, which specifies that purchases cannot exceed cash balances held at the beginning of the period. In this model monetary authorities set rates of interest and accommodate the demand for balances; alternatively, they set the supply of balances and rates of interest adjust to attain equilibrium. For a given supply of balances, an existence of competitive equilibrium prices of commodities and rates of interest is proved under standard assumptions. Several conclusions on multiplicity of equilibrium are drawn in different cases of monetary policy both under uncertainty and certainty assumptions. For the entire collection see [Zbl 0983.00071].

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