General Equilibrium With Nonconvexities, Sunspots, and Money
50 Pages Posted: 31 Oct 2007
Date Written: December 2005
Abstract
We study general equilibrium with nonconvexities. In these economies there exist sunspot equilibria without the usual assumptions needed in convex economies, and they have good welfare properties. Moreover, in these equilibria, agents act as if they have quasi-linear utility. Hence wealth effects vanish. We use this to construct a new model of monetary exchange. As in Lagos-Wright, trade occurs in both centralized and decentralized markets, but while that model requires quasilinearity, we have general preferences. Given our specification looks much like the textbook Arrow-Debreu model, we think this constitutes progress on the classic problem of integrating money and general equilibrium theory. We also use the model to discuss another classic issue: the relation between inflation and unemployment.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Unified Framework for Monetary Theory and Policy Analysis
By Ricardo Lagos and Randall Wright
-
A Unified Framework for Monetary Theory and Policy Analysis, Second Version
By Ricardo Lagos and Randall Wright
-
Liquidity, Business Cycles, and Monetary Policy
By Nobuhiro Kiyotaki and John Moore
-
Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium
-
By Gabriele Camera and Dean Corbae
-
Individual and Aggregate Real Balances in a Random Matching Model
By Ruilin Zhou
-
Search, Money and Capital: a Neoclassical Dichotomy
By S. Borağan Aruoba and Randall Wright
-
Search, Money and Capital: A Neoclassical Dichotomy, Second Version
By S. Borağan Aruoba and Randall Wright
-
On the Efficiency of Monetary Exchange: How Divisibility of Money Matters