Monetary equilibrium in an overlapping generations model with productive capital

Amitava Bose, Debraj Ray

    Research output: Contribution to journalArticle

    Abstract

    We study perfect foresight competitive equilibrium in an overlapping generations model with productive capital and a fixed nominal stock of money. We obtain almost-complete characterizations of (a) the existence of a monetary equilibrium from an arbitrary initial capital stock, and (b) the existence of an efficient monetary equilibrium from an arbitrary initial capital stock. When the initial capital stock is no larger than the golden rule stock, the necessary and sufficient condition for both (a) and (b) is the dynamic inefficiency (in the sense of Malinvaud) of the autarkic (or nonmonetary) equilibrium from the same initial stock. However, this condition, though necessary, is not sufficient for the existence of a monetary equilibrium when the initial stock exceeds the golden rule stock (and still more conditions are needed for an efficient monetary equilibrium to exist). We provide characterizations for these cases, and as corollaries obtain examples in which (a) the nonmonetary equilibrium is inefficient but no monetary equilibrium exists, and (b) monetary equilibria exist but no efficient monetary equilibrium does.

    Original languageEnglish (US)
    Pages (from-to)697-716
    Number of pages20
    JournalEconomic Theory
    Volume3
    Issue number4
    DOIs
    StatePublished - Dec 1993

    Fingerprint

    Overlapping generations model
    Monetary equilibrium
    Capital stock
    Golden rule
    Competitive equilibrium
    Perfect foresight
    Dynamic inefficiency

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Monetary equilibrium in an overlapping generations model with productive capital. / Bose, Amitava; Ray, Debraj.

    In: Economic Theory, Vol. 3, No. 4, 12.1993, p. 697-716.

    Research output: Contribution to journalArticle

    Bose, Amitava ; Ray, Debraj. / Monetary equilibrium in an overlapping generations model with productive capital. In: Economic Theory. 1993 ; Vol. 3, No. 4. pp. 697-716.
    @article{a391c736ec3e40e39ee5c66810125b5d,
    title = "Monetary equilibrium in an overlapping generations model with productive capital",
    abstract = "We study perfect foresight competitive equilibrium in an overlapping generations model with productive capital and a fixed nominal stock of money. We obtain almost-complete characterizations of (a) the existence of a monetary equilibrium from an arbitrary initial capital stock, and (b) the existence of an efficient monetary equilibrium from an arbitrary initial capital stock. When the initial capital stock is no larger than the golden rule stock, the necessary and sufficient condition for both (a) and (b) is the dynamic inefficiency (in the sense of Malinvaud) of the autarkic (or nonmonetary) equilibrium from the same initial stock. However, this condition, though necessary, is not sufficient for the existence of a monetary equilibrium when the initial stock exceeds the golden rule stock (and still more conditions are needed for an efficient monetary equilibrium to exist). We provide characterizations for these cases, and as corollaries obtain examples in which (a) the nonmonetary equilibrium is inefficient but no monetary equilibrium exists, and (b) monetary equilibria exist but no efficient monetary equilibrium does.",
    author = "Amitava Bose and Debraj Ray",
    year = "1993",
    month = "12",
    doi = "10.1007/BF01210266",
    language = "English (US)",
    volume = "3",
    pages = "697--716",
    journal = "Economic Theory",
    issn = "0938-2259",
    publisher = "Springer New York",
    number = "4",

    }

    TY - JOUR

    T1 - Monetary equilibrium in an overlapping generations model with productive capital

    AU - Bose, Amitava

    AU - Ray, Debraj

    PY - 1993/12

    Y1 - 1993/12

    N2 - We study perfect foresight competitive equilibrium in an overlapping generations model with productive capital and a fixed nominal stock of money. We obtain almost-complete characterizations of (a) the existence of a monetary equilibrium from an arbitrary initial capital stock, and (b) the existence of an efficient monetary equilibrium from an arbitrary initial capital stock. When the initial capital stock is no larger than the golden rule stock, the necessary and sufficient condition for both (a) and (b) is the dynamic inefficiency (in the sense of Malinvaud) of the autarkic (or nonmonetary) equilibrium from the same initial stock. However, this condition, though necessary, is not sufficient for the existence of a monetary equilibrium when the initial stock exceeds the golden rule stock (and still more conditions are needed for an efficient monetary equilibrium to exist). We provide characterizations for these cases, and as corollaries obtain examples in which (a) the nonmonetary equilibrium is inefficient but no monetary equilibrium exists, and (b) monetary equilibria exist but no efficient monetary equilibrium does.

    AB - We study perfect foresight competitive equilibrium in an overlapping generations model with productive capital and a fixed nominal stock of money. We obtain almost-complete characterizations of (a) the existence of a monetary equilibrium from an arbitrary initial capital stock, and (b) the existence of an efficient monetary equilibrium from an arbitrary initial capital stock. When the initial capital stock is no larger than the golden rule stock, the necessary and sufficient condition for both (a) and (b) is the dynamic inefficiency (in the sense of Malinvaud) of the autarkic (or nonmonetary) equilibrium from the same initial stock. However, this condition, though necessary, is not sufficient for the existence of a monetary equilibrium when the initial stock exceeds the golden rule stock (and still more conditions are needed for an efficient monetary equilibrium to exist). We provide characterizations for these cases, and as corollaries obtain examples in which (a) the nonmonetary equilibrium is inefficient but no monetary equilibrium exists, and (b) monetary equilibria exist but no efficient monetary equilibrium does.

    UR - http://www.scopus.com/inward/record.url?scp=34250079536&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=34250079536&partnerID=8YFLogxK

    U2 - 10.1007/BF01210266

    DO - 10.1007/BF01210266

    M3 - Article

    VL - 3

    SP - 697

    EP - 716

    JO - Economic Theory

    JF - Economic Theory

    SN - 0938-2259

    IS - 4

    ER -