Monetary Equilibria over an Infinite Horizon

  • Gaetano Bloise
  • Jacques H. Drèze
  • Herakles M. Polemarchakis
Part of the Studies in Economic Theory book series (ECON.THEORY, volume 25)


Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a sequentially complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances through open market operations or loans. A public authority, which, most pertinently, inherits a strictly positive public debt, raises revenue from taxes and seignorage, and it distributes possible budget surpluses to individuals through transfers. Competitive equilibria exist, under mild solvency conditions. But, for a fixed path of rates of interest, there is a non-trivial multiplicity of equilibrium paths of prices of commodities. Determinacy requires that, subject to no-arbitrage and in addition to rates of interest, the prices of state-contingent revenues be somehow determined.

Key words

Money Equilibrium Indeterminacy Monetary policy Fiscal policy 


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Copyright information

© Springer-Verlag Berlin Heidelberg 2006

Authors and Affiliations

  • Gaetano Bloise
    • 1
  • Jacques H. Drèze
    • 2
  • Herakles M. Polemarchakis
    • 3
  1. 1.DEIRFacolt di Economia Universit di Sassari Via Torre TondaSassariItaly
  2. 2.CORECatholic University of Louvain la NeuveBelgium
  3. 3.Department of EconomicsBrown UniversityUSA

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