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Monetary equilibria

Author

Listed:
  • DREZE, Jacques

    (Université catholique de Louvain, CORE, Belgium)

  • POLEMARCHAKIS, Heracles

    (Université catholique de Louvain, CORE, Belgium)

Abstract

The introduction of banks that issue money and supply balances and pay out their profis as dividends is the natural modification of the model of general competitive equilibrium that encompasses monetary economies with an operative transactions technology. Monetary policy sets nominal rates of interest and accommodates the demand for balances; alternatively, it sets the supply of balances and rates of interest adjust for money markets to clear. Competitive equilibria exist. Under uncertainty, monetary policy fails to determine the distribution of the rate of inflation or the allocation of resources at equilibrium. If, in addition to rates of interest, monetary policy sets the prices of contingent loans subject to no-arbitrage constraints, or targets the distribution of the terminal level of prices, it lifts the multiplicity.
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Suggested Citation

  • DREZE, Jacques & POLEMARCHAKIS, Heracles, 1995. "Monetary equilibria," LIDAM Discussion Papers CORE 1995078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1995078
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp1995.html
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    References listed on IDEAS

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    2. Gaetano Bloise & Jacques H. Drèze & Herakles M. Polemarchakis, 2006. "Monetary Equilibria over an Infinite Horizon," Studies in Economic Theory, in: Christian Schultz & Karl Vind (ed.), Institutions, Equilibria and Efficiency, chapter 5, pages 69-93, Springer.
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    Cited by:

    1. Marimon, Ramon & Nicolini, Juan Pablo & Teles, Pedro, 2003. "Inside-outside money competition," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1701-1718, November.
    2. Pascal Gourdel & Leila Triki, 2005. "Incomplete markets and monetary policy," Cahiers de la Maison des Sciences Economiques b05024, Université Panthéon-Sorbonne (Paris 1).
    3. BLOISE, Gaetano & DRÈZE, Jacques & POLEMARCHAKIS, Heracles, 2002. "Money and indeterminacy over an infinite horizon," CORE Discussion Papers 2002021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Dimitrios P. Tsomocos, 2012. "Equilibrium Analysis, Banking and Financial Instability," Chapters, in: The Challenge of Financial Stability, chapter 4, pages 61-97, Edward Elgar Publishing.
    5. Bloise, Gaetano, 2006. "Money, gains to trade and impatience," Research in Economics, Elsevier, vol. 60(1), pages 22-34, March.
    6. Bai, Jinhui H. & Schwarz, Ingolf, 2006. "Monetary equilibria in a cash-in-advance economy with incomplete financial markets," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 422-451, August.
    7. Bernardino Adão & Pedro Teles, 2004. "Monetary Policy with State Contingent Interest Rates," Working Papers w200418, Banco de Portugal, Economics and Research Department.
    8. Schabert, Andreas, 2005. "Identifying monetary policy shocks with changes in open market operations," European Economic Review, Elsevier, vol. 49(3), pages 561-577, April.
    9. Goodhart, Charles A. E. & Sunirand, Pojanart & Tsomocos, Dimitrios P., 2004. "A model to analyse financial fragility: applications," Journal of Financial Stability, Elsevier, vol. 1(1), pages 1-30, September.
    10. McMahon, Michael & Peiris, M. Udara & Polemarchakis, Herakles, 2018. "Perils of unconventional monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 93(C), pages 92-114.
    11. Gourdel & Triki, 2005. "Monetary Policy with Incomplete Markets," Finance 0503026, University Library of Munich, Germany.
    12. Andreas Schabert, 2004. "On the relevance of open market operations for the short-run effects of monetary policy," Money Macro and Finance (MMF) Research Group Conference 2003 83, Money Macro and Finance Research Group.
    13. Ingolf Schwarz, 2006. "Monetary Equilibria in a Baumol-Tobin Economy," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2006_15, Max Planck Institute for Research on Collective Goods.

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    More about this item

    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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