Mierzejewski, Fernando (2007): A Model of Monetary Equilibrium with Random Output and Restricted Borrowing.
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An alternative theoretical setting is presented to characterise the money demand and the monetary equilibrium. Two main hypotheses are stated that contradict the assumptions normally sustained by scholars and policy-makers: national output is assumed to be a random variable, and people are supposed to face borrowing restrictions in capital markets. After the model of James Tobin, 1958, the demand for balances is determined in order to maximise the expected return of a certain portfolio combining risk and cash holdings. Unlike the model of Tobin, the prices of the underlying exposures are established in actuarial terms. Then the efficacy of monetary policy is explicitly affected by the expected return and the volatility of the series of percentage returns of the national output.
|Item Type:||MPRA Paper|
|Original Title:||A Model of Monetary Equilibrium with Random Output and Restricted Borrowing|
|Keywords:||Monetary equilibrium; Money demand; Liquidity-preference; Monetary policy; Quantity theory.|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money
|Depositing User:||Fernando Mierzejewski|
|Date Deposited:||24. Jan 2010 18:55|
|Last Modified:||16. Feb 2013 02:44|
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Available Versions of this Item
The Short-Run Monetary Equilibrium with Liquidity Constraints. (deposited 02. Jan 2008 15:18)
- A Model of Monetary Equilibrium with Random Output and Restricted Borrowing. (deposited 24. Jan 2010 18:55) [Currently Displayed]