Money and Indeterminacy Over an Infinite Horizon

Brown University Dept. of Economics Working Paper No. 02-12

35 Pages Posted: 24 May 2002

See all articles by Gaetano Bloise

Gaetano Bloise

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Jacques H. Dreze

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

H. M. Polemarchakis

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: April 2002

Abstract

Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances. Competitive equilibria exist. But, for a fixed path of rates of interest, there is a non-trivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be set.

Keywords: Money, equilibrium, indeterminacy, monetary policy, fiscal policy

JEL Classification: D50, E40, E50

Suggested Citation

Bloise, Gaetano and Dreze, Jacques H. and Polemarchakis, Herakles, Money and Indeterminacy Over an Infinite Horizon (April 2002). Brown University Dept. of Economics Working Paper No. 02-12, Available at SSRN: https://ssrn.com/abstract=310409 or http://dx.doi.org/10.2139/ssrn.310409

Gaetano Bloise

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
1348 Louvain-la-Neuve, 1348
Belgium
+32 10 47 4328 (Phone)
+32 10 47 4301 (Fax)

Jacques H. Dreze (Contact Author)

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium
32 10 474347 (Phone)

Herakles Polemarchakis

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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