Document Type
Discussion Paper
Publication Date
12-1-2002
CFDP Number
1389
CFDP Pages
37
Abstract
We consider a two-period model with missing assets and missing market links, in which money plays a central role and is linked to every instrument in the economy. If there are enough missing market links relative to the ratio of outside to inside money, then monetary equilibrium (ME) exists and money has positive value. The nonexistence of GEI (of the underlying economy) shows up as a liquidity trap in terms of the ME. In sharp contrast to GEI, the ME are generally determinate not only in terms of real, but also financial, variables.
Recommended Citation
Dubey, Pradeep and Geanakoplos, John, "Monetary Equilibrium with Missing Markets" (2002). Cowles Foundation Discussion Papers. 1654.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1654