Money and Production, and Liquidity Trap
We prove the existence of monetary equilibrium in a ﬁnite horizon economy with production. We also show that if agents expect the monetary authority to signiﬁcantly decrease the supply of bank money available for short term loans in the future, then the economy will fall into a liquidity trap today.
Dubey, Pradeep and Geanakoplos, John, "Money and Production, and Liquidity Trap" (2006). Cowles Foundation Discussion Papers. 1865.