Arbeitspapier

On imperfect competition with occasionally binding cash-in-advance constraints

We depart from the assumption of perfect competition in the final goods sector, commonly used in cash-in-advance (CIA) models, providing extensive theoretical analysis of the general equilibrium of an economy with imperfect competition, endogenous production and fully flexible prices in the presence of occasionally binding CIA constraints, under general assumptions about the velocity of money. Homothetic preferences generate Marshallian demands which are linear in own price allowing for any combination of equilibrium number of firms and demand elasticity. Whether the CIA constraint binds or not depends, among others, on the degree of imperfect competition. As the market becomes more competitive it is certainly no less likely that the CIA constraint will bind. The degree of imperfect competition directly affects the distribution of consumption and indirectly the level of output and work effort via the CIA constraint. With perfect foresight, there is an optimal negative steady-state inflation rate. We also consider how the introduction of capital and bonds would fit into the framework.

Sprache
Englisch

Erschienen in
Series: Cardiff Economics Working Papers ; No. E2012/3

Klassifikation
Wirtschaft
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Price Level; Inflation; Deflation
Demand for Money
Money Supply; Credit; Money Multipliers
Thema
cash-in-advance
general equilibrium
monopolistic competition
imperfect competition
money velocity

Ereignis
Geistige Schöpfung
(wer)
Dixon, Huw
Pourpourides, Panayiotis M.
Ereignis
Veröffentlichung
(wer)
Cardiff University, Cardiff Business School
(wo)
Cardiff
(wann)
2012

Handle
Letzte Aktualisierung
20.09.2024, 08:22 MESZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Dixon, Huw
  • Pourpourides, Panayiotis M.
  • Cardiff University, Cardiff Business School

Entstanden

  • 2012

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