Money and Bonds: An Equivalence Theorem

Posted: 22 Jul 2008

See all articles by Narayana Kocherlakota

Narayana Kocherlakota

University of Minnesota - Twin Cities - Department of Economics

Date Written: July 2007

Abstract

This paper considers four models in which immortal agents face idiosyncratic shocks and trade only a single risk-free asset over time. The four models specify this single asset to be private bonds, public bonds, public money, or private money respectively. I prove that, given an equilibrium in one of these economies, it is possible to pick the exogenous elements in the other three economies so that there is an outcome-equivalent equilibrium in each of them. (The term exogenous variables refers to the limits on private issue of money or bonds, or the supplies of publicly issued bonds or money.)

Keywords: Money bonds, Incomplete markets

JEL Classification: E40, E51

Suggested Citation

Kocherlakota, Narayana, Money and Bonds: An Equivalence Theorem (July 2007). Available at SSRN: https://ssrn.com/abstract=1162907

Narayana Kocherlakota (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5318 (Phone)
612-624-0209 (Fax)

HOME PAGE: http://www.econ.umn.edu/~nkocher/

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