Monetary equilibria over an infinite horizon

DOI10.1007/S00199-004-0472-XMaRDI QIDQ1780155zbMATH OpenOpenAlexFDO

Authors Gaetano Bloise, Jacques H. Drèze, Herakles M. Polemarchakis

Publication date 7 June 2005

Published in Economic Theory (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s00199-004-0472-x

zbMATH Keywords

fiscal policyindeterminacy

Mathematics Subject Classification ID

General equilibrium theory (91B50) Economic growth models (91B62) Macroeconomic theory (monetary models, models of taxation) (91B64)

Review text

In the paper, the modified canonical Walrasian model is studied. Modification is done by introducing money balances facilitating transactions. In the model the economy extends over an infinite horizon under uncertainty. There is a number of recent works proposing different approaches in similar situations. In the present paper, the equilibrium consisting of prices, state prices, a collection of plans for individuals and a public plan is studied. Assumptions concerning preferences and endowments are formulated. Some restrictions relate to nominal rates of interest, transfers and initial public liability. It is supposed that the individual demands securities and balances satisfy an appropriate budget constraint. Under these assumptions it is proved that an equilibrium is finite. The criterion of attainability of a consumption plan at an equilibrium is derived. It is shown that, for a fixed path of rates of interest, there exist a non-trivial multiplicity of equilibrium paths of prices of commodities, i.e., indeterminacy appears in the model.

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