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

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.

Determinacy, monetary equilibrium, incomplete market