Pareto Improving Monetary Policy in Incomplete Markets

We show that for generic economies, every equilibrium admits Pareto improving monetary policy, even with multiple commodities per state. The main assumption is that asset incompleteness be intermediate, in that household heterogeneity does not exceed the number of assets present and absent. We argue this as a special case of the general framework in Turner (2003b) for proving the generic existence of Pareto improving taxes. JEL Classification: D52, D61, E52