Lovo, Stefano and Polemarchakis, Herakles. (2010) Myopia and monetary equilibria. Journal of Mathematical Economics, Vol.46 (No.5). pp. 925-936. ISSN 0304-4068

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Abstract

In an infinitely lived, representative individual economy, important properties of competitive equilibria, such as determinacy and the non-existence of monetary equilibria, are not robust to the introduction of myopia. An individual is myopic if, at each date, he plans consumption only for that date and few periods that immediately follow; that is, his planning horizon, n, is finite. Equilibria with myopia can display real indeterminacy and allow for monetary as well as non-monetary steady states; thus, they share some of the features of equilibria in economies of overlapping generation. The equilibrium price dynamics (but not the consumption dynamics) of an exchange economy with extreme myopia, n =1, are identical to the dynamics of an overlapping generation economy with two-period lives. (C) 2010 Elsevier B.V. All rights reserved.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions Q Science > QA Mathematics H Social Sciences
Divisions:	Faculty of Social Sciences > Economics
Journal or Publication Title:	Journal of Mathematical Economics
Publisher:	Elsevier
ISSN:	0304-4068
Date:	20 September 2010
Volume:	Vol.46
Number:	No.5
Number of Pages:	12
Page Range:	pp. 925-936
Identification Number:	10.1016/j.jmateco.2010.08.007
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
URI:	http://wrap.warwick.ac.uk/id/eprint/4615

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