Non-connectedness of the set of equilibrium money prices: The overlapping-generations economy |
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| Institution: | 1. Bocconi University, Department of Finance, Via Röntgen 1, Milano 20136, Italy;2. Michigan State University, Department of Finance, Eli Broad College of Business, 667 North Shaw Lane, East Lansing, MI 48824, USA |
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| Abstract: | Consider the overlapping-generations economy with nominal taxes and transfers. Under some conditions, the set of equilibrium money prices is a non-negative interval. It has not been known whether this set can consist of two or more disjoint intervals. Three examples are provided here in which the set of equilibrium money prices is a non-connected set. The examples are for a finite-horizon balanced economy, an infinite-horizon balanced economy, and an infinite-horizon non-balanced economy. |
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