The structure of financial equilibrium with exogenous yields

Monetary Equilibria with Monopolistic Competition and Sticky Prices

“…Our result is closely related to the indeterminacy result in Cass (1985), Balasko and Cass (1989), and Geanakoplos and Mas-Colell (1989). They considered an incomplete-market economy where money serves only as a unit of account, and they showed that the indeterminacy of inflation has real effects; since money is only an abstract unit of account, there is no room for monetary policy there.…”

Equilibrium analysis, banking and financial instability

“…Therefore, prices, interest rates and consumption are almost always determinate with respect to the data of the economy. This is in contrast with the real indeterminacy theorem of Geanakoplosn and Mas-Collel [27] and Balasko and Cass [4] but consistent with the determinacy theorem of Dubey and Geanakoplos [20]. The economic reason that determinacy, both real and nominal, obtains is that positive liquid wealth (i.e., outside money in the economy) anchors interest rates by the term structure of interest rates proposition and thus uniquely (locally) determines the rest of the variables in the model (i.e., prices, consumption, default).…”

“…4 Shubik [53] also emphasised the virtues of explicitly modelling each transaction. Grandmont [30], [31], [32], [33] also introduced a banking sector into general equilibrium with overlapping generations and he pointed out the inefficiency of trade with money.…”

Multiplicity in general financial equilibrium with portfolio constraints

“…This has to do with the differences between the log-linear, tree-type asset pricing model adopted here and the traditional real assets model of GFE theory. Second, the introduction of portfolio constraints may expand the set of equilibria, even though by itself it does not generate equilibrium indeterminacy (as in the nominal assets model of Balasko, Cass, and Siconolfi (1990)). To our knowledge, this finding is new in the literature.…”