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| Title: | | Monetary equilibria in a cash-in-advance economy with incomplete financial markets  |
| Authors: | | Bai, Jinhui H. Schwarz, Ingolf |
| Issue Date: | | 2005 |
| Series/Report no.: | | Preprints of the Max Planck Institute for Research on Collective Goods 2005,18 |
| Abstract: | | The general equilibrium model with incomplete financial markets (GEI) is extended by adding fiat money, fiscal and monetary policy and a cash-in-advance constraint. The central bank either pegs the interest rate or money supply while the fiscal authority sets a Ricardian or a non-Ricardian fiscal plan. We prove the existence of equilibria in all four scenarios. In Ricardian economies, the conditions required for existence are not more restrictive than in standard GEI. In non- Ricardian economies, the sufficient conditions for existence are more demanding. In the Ricardian economy, neither the price level nor the equivalent martingale measure are determinate. |
| Subjects: | | Money Incomplete Markets Fiscal Policy Indeterminacy |
| JEL: | | D52 E40 E50 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Preprints of the Max Planck Institute for Research on Collective Goods
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