We derive the general equilibrium short-term real and nominal interest rates in a monetary economy affected by technological and monetary shocks and where the price level dynamics is endogenous. Assuming fairly general processes for technology and money supply, we show that an inherent feature of our equilibrium is that any real variable dynamics, in particular that of the short-term real inter...

A popular model in the literature postulates an interest rate rule, a NAIRU price equation, and an aggregate demand equation in which aggregate demand depends on the real interest rate. In this model a positive inflation shock with the nominal interest rate held constant is explosive because it increases aggregate demand (because the real interest rate is lower), which increases inflation throu...

This paper studies the potential for liquidity crises and their impact on the course of monetary and exchange rate policies in a microfounded general equilibrium dynamic model in the tradition of Diamond and Dybvig (1983) and Chang and Velasco (2000). We produce a small open economy pure exchange overlapping generations model with random relocation along the lines of Smith (2002). The combinati...

The concept of fuzzy random variable has been applied in several papers to model the present value of life insurance liabilities. It allows the fuzzy uncertainty of the interest rate and the probabilistic behaviour of mortality to be used throughout the valuation process without any loss of information. Using this framework, and considering a triangular interest rate, this paper develops closed...