Price rigidity and use of money
Description
type:text
We consider an economy in which the price mechanism in competitive market partially malfunctions ; namely some prices do not move in response to discrepancy between supply and demand. We formalize this case as a model where some prices are flexible as usual whereas others are fixed. On the assumption that every agent is a price taker, we show that even in this situation general equilibria do exist, but at the cost of two important properties ; namely, decisive relative prices and determinacy of equilibrium. On one hand, ineffectiveness of relative prices naturally induces use of money. We show, on the other hand, that money is of great use to solve the problem of indeterminacy of equilibrium. Specifically, money proves generically to yield the local determinacy of equilibrium under some condition, which also implies that money substantially affects a real economy.
Journal
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- Keio economic studies
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Keio economic studies 52 43-63, 2016
Keio Economic Society, Keio University
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Details 詳細情報について
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- CRID
- 1050001338956191872
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- NII Article ID
- 120006028054
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- ISSN
- 00229709
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- Text Lang
- en
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- Article Type
- journal article
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- Data Source
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- IRDB
- CiNii Articles