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Inside versus outside money: indeterminacy in GEI models

Author

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  • Leo Ferraris
Abstract
In this paper I consider the issue of indeterminacy of equilibrium in a general equilibrium model with incomplete markets and nominal assets. First, I present some classic results on nominal and real indeterminacy in those models. I then proceed to analyse a more recent literature that focused on the role of money in eliminating indeterminacy of the price level. I show that determinacy depends crucially on the presence of outside money in the economy. I also point out some of the limitations of this literature and some possible way out. In the last part I present a paper that deals with indeterminacy in an altogether different way, namely introducing non-competitive intermediaries that design assets and price them.

Suggested Citation

  • Leo Ferraris, 2002. "Inside versus outside money: indeterminacy in GEI models," Working Papers in Public Economics 62, University of Rome La Sapienza, Department of Economics and Law.
    • Handle: RePEc:sap:wpaper:wp62
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    References listed on IDEAS

    as
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    5. 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.
    6. Balasko, Yves & Cass, David, 1989. "The Structure of Financial Equilibrium with Exogenous Yields: The Case of Incomplete Markets," Econometrica, Econometric Society, vol. 57(1), pages 135-162, January.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    GEI; indeterminacy; money.;
    All these keywords.

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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