Money and Production, and Liquidity Trap

27 Pages Posted: 26 Jul 2006

See all articles by John Geanakoplos

John Geanakoplos

Yale University; Santa Fe Institute

Pradeep K. Dubey

SUNY Stony Brook - Center for Game Theory in Economics

Date Written: July 2006

Abstract

We prove the existence of monetary equilibrium in a finite horizon economy with production. We also show that if agents expect the monetary authority to significantly decrease the supply of bank money available for short term loans in the future, then the economy will fall into a liquidity trap today.

Keywords: Central bank, Inside money, Outside money, Incomplete assets, Production, Monetary equilibrium, Liquidity, Liquidity trap

JEL Classification: D50, D51, D52, D53, D58, D60, E12, E31, E32, E41

Suggested Citation

Geanakoplos, John D and Dubey, Pradeep K., Money and Production, and Liquidity Trap (July 2006). Cowles Foundation Discussion Paper No. 1574, Available at SSRN: https://ssrn.com/abstract=920604

John D Geanakoplos (Contact Author)

Yale University ( email )

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HOME PAGE: http://https://economics.yale.edu/people/faculty/john-geanakoplos

Santa Fe Institute ( email )

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Pradeep K. Dubey

SUNY Stony Brook - Center for Game Theory in Economics ( email )

Stony Brook, NY 11794
United States
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