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Full-Text Articles in Social and Behavioral Sciences
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes’ general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets …
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes’ general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets …