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Intertemporal General Equilibrium and Monetary Theory

In: Monetary Theory as a Basis for Monetary Policy

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  • Jacques H. Drèze

    (Université Catholique de Louvain)

  • Heracles M. Polemarchakis

    (Université Catholique de Louvain)

Abstract

Theory is often at odds with the thinking and practice of monetary authorities. A confrontation of this situation is timely. General equilibrium theory serves to check the consistency of models and to bring out some of their properties. Surprisingly, an enquiry into monetary theory from the perspective of general equilibrium leads to conclusions that resemble views expressed recently by specialists in monetary theory and policy, and suggests an approach to policy resembling that practised by monetary authorities. Also, it delineates theoretical issues more sharply than do less abstract formulations.

Suggested Citation

  • Jacques H. Drèze & Heracles M. Polemarchakis, 2001. "Intertemporal General Equilibrium and Monetary Theory," International Economic Association Series, in: Axel Leijonhufvud (ed.), Monetary Theory as a Basis for Monetary Policy, chapter 2, pages 33-71, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-4039-3961-6_2
    DOI: 10.1007/978-1-4039-3961-6_2
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    Cited by:

    1. Gaël Giraud & Céline Rochon, 2010. "Transition to Equilibrium in International Trades," Documents de travail du Centre d'Economie de la Sorbonne 10012, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Gourdel & Triki, 2005. "Monetary Policy with Incomplete Markets," Finance 0503026, University Library of Munich, Germany.
    3. Monique Florenzano & Stella Kanellopoulou & Yiannis Vailakis, 2006. "Equilibrium of incomplete markets with money and intermediate banking system," Post-Print halshs-00112209, HAL.
    4. Pascal Gourdel & Leila Triki, 2005. "Incomplete markets and monetary policy," Post-Print halshs-00193970, HAL.
    5. Pascal Gourdel & Leila Triki, 2005. "Incomplete markets and monetary policy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00193970, HAL.
    6. Michael Magill & Martine Quinzii, 2014. "Term structure and forward guidance as instruments of monetary policy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 1-32, May.
    7. Magill, Michael & Quinzii, Martine, 2014. "Anchoring expectations of inflation," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 86-105.
    8. Marko Backovic & Zoran Popovic, 2012. "The Analysis Of Model Of General Economic Equilibrium And Financial Instability Of Economic System," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 8(1), pages 63-85.

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    More about this item

    Keywords

    Interest Rate; Monetary Policy; Price Level; General Equilibrium; Money Supply;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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