Title

Active intermediation in a monetary overlapping generations economy

Campus Units

Economics

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

1998

Journal or Book Title

Journal of Economic Dynamics and Control

Volume

22

Issue

10

First Page or Article ID Number

1543

Last Page

1574

DOI

10.1016/S0165-1889(97)00105-X

Abstract

This paper establishes that the profit-seeking activities of private intermediaries can ensure Pareto efficiency in the standard pure-exchange monetary overlapping generations economy without the need for government monetary or fiscal policy intervention. Moreover, these profit-seeking activities are shown to rule out all aperiodic and k-periodic cycles for k greater than 2. Contrary to much recent work on intermediation, the profit opportunities that arise for intermediaries in this context are not due to assumed frictions or asymmetric information. Rather, they are due to the dynamic open-ended structure of the economy, which permits debt roll-over.

JEL Classification

D61, E44, G23

Comments

This is a working paper of an article from Journal of Economic Dynamics and Control 22 (1998): 1543, doi:10.1016/S0165-1889(97)00105-X