Adv. Math. Econ. Volume 1, pp.127-133 (1999)
Determinacy of monetary equilibria in an economy with no real risk
Shinichi Suda
Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan
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This paper examines the determinacy of equilibria in an exchange
economy with money and a nominal bond where the only source of uncertainty
comes from fluctuations in the money supply. Money plays the role of medium of
exchange and, through a cash-in-advance constraint, affects the real allocation. We
show that the monetary economy can be transformed into a standard Arrow-Debreu
economy, and these two economies have the same equilibrium allocations. Applying
the theorem on the finiteness of equilibria by Debreu [3], we prove that the set of
monetary equilibria is locally unique, generically for every level of money supply.
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Determinacy, monetary equilibrium, incomplete market
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