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Active intermediation in a monetary overlapping generations economy

✍ Scribed by Mark Pingle; Leigh Tesfatsion

Publisher
Elsevier Science
Year
1998
Tongue
English
Weight
224 KB
Volume
22
Category
Article
ISSN
0165-1889

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✦ Synopsis

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 kperiodic 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.

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