Indeterminacy of equilibrium allocations in monetary open economies 1
نویسنده
چکیده
In an open economy, outside money in positive supply does not eliminate the real indeterminacy which arises under uncertainty and incomplete asset markets. If money supply is subject to shocks or is not perfectly credible in all countries, the level of a fixed exchange rate matters. Analogous results obtain in cash in advance models.
منابع مشابه
Intertemporal general equilibrium and monetary theory 1
The introduction of banks that issue money and supply balances and pay out their profits as dividends is the natural modification of the model of general competitive equilibrium that encompasses monetary economies. Competitive equilibria exist. Nevertheless, eventhough there is a well defined money market, competitive equilibrium allocations are indeterminate. On an event tree with N nodes, of ...
متن کاملWorldwide Macroeconomic Stability and Monetary Policy Rules - Taylor Conference 2007 - FRB Dallas
We study the interaction of multiple large economies in dynamic stochastic general equilibrium. Each economy has a monetary policymaker that attempts to control the economy through the use of a linear nominal interest rate feedback rule. We show how the determinacy of worldwide equilibrium depends on the joint behavior of policymakers worldwide. We also show how indeterminacy exposes all econom...
متن کاملWorldwide Macroeconomic Stability and Monetary Policy Rules
We study the interaction of multiple large economies in dynamic stochastic general equilibrium. Each economy has a monetary policymaker that attempts to control the economy through the use of a linear nominal interest rate feedback rule. We show how the determinacy of worldwide equilibrium depends on the joint behavior of policymakers worldwide. We also show how indeterminacy exposes all econom...
متن کاملOn the Efficiency of Monetary and Fiscal Policy in Open Economies
This paper investigates the efficiency of monetary and fiscal policy in a twocountry general equilibrium model with monopolistic competition and wage stickiness. When monopoly distortions are completely eliminated, we find that under some conditions, stochastic government spending can affect the efficiency of global monetary policy rules that replicate the real allocations under flexible wages....
متن کاملGeneral Equilibrium with Endogenously Incomplete Financial Markets
The present paper studies a class of general equilibrium economies with imperfectly competitive financial intermediaries and price-taking consumers. Intermediaries optimally choose the securities they issue and the bid-ask spread they charge. Financial intermediation is costly, and hence markets are endogenously incomplete. An appropriate equilibrium concept is developed, and existence is prove...
متن کامل