Real Indeterminacy in a Cash-In-Advance Economy

  • Stéphane Auray
  • Fabrice Collard
  • Patrick Fève
Chapter

Abstract

This paper studies the dynamic properties of a highly stylized monetary economy in which an infinitely-lived representative household can transfer wealth from one period to another relying on money and is cash-constrained on the good market. We show that a low intertemporal substitution resulting from preferences can generate real indeterminacy. This result is illustrated by four showcases: isoelastic utility function, minimum consumption, internal habit and external habit. We further show that real indeterminacy is not sufficient per se to obtain an empirically relevant representation of the effects of monetary policy. The form of the beliefs matters.

Keywords

Monetary Policy Inflation Rate Market Imperfection Money Growth Minimum Consumption 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media New York 2002

Authors and Affiliations

  • Stéphane Auray
    • 1
  • Fabrice Collard
    • 2
  • Patrick Fève
    • 3
  1. 1.LEN-C3EUniversité de Nantes & GREMAQ, Université de Toulouse IFrance
  2. 2.GREMAQUniversité de Toulouse I & CNRSFrance
  3. 3.GREMAQUniversité de Toulouse I & WEIFrance

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