SFB 303 Discussion Paper No. A - 302
Author: Eckwert, Bernhard
Title: Allocative Effects of Financial Assets and the Long Run Neutrality of
Money when Markets are Incomplete
Abstract: We analyze the allocative role of money as a numeraire in an
intertemporal general equilibrium model with incomplete financial markets
and nominal financial instruments. It is shown that regardless of their
return specification nominal assets in net supply increase the consumption
risk and trigger an endogenous monetary process which diminishes the
influence of these assets on the equilibrium allocation through time. The
nonneutrality of money claimed in the recent literature is a temporary
phenomenon only. Asymptotically, the traditional neutrality theorems are
valid.
Keywords:
JEL-Classification-Number:
Creation-Date: July 1990
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