Eli F. Heckscher found that in 16th century Sweden: 1) indirect barter was the most common exchange method and 2) monetary exchange was carried out with different coins, none a generally accepted medium of exchange. These findings refute the search and transaction cost models of the emergence of...

Monetary and fiscal policy do not determine the stochastic path of prices: in the absence of financial policy, there remains indeterminacy indexed by an arbitrary probability measure over the set of states of the world. With an interest rate policy, and only if the asset market is complete,...

We consider a cash-in-advance economy under uncertainty in which monetary policy sets either short-term nominal interest rates or money supplies. We show that both the initial price level and the distribution of the inflation rate up to its expectation are indeterminate, regardless of the degree...

Money provides liquidity services through a cash-in-advance constraint. The exchange of commodities and assets extends over an infinite horizon under uncertainty and a complete asset market. Monetary policy sets the path of rates of interest and accommodates the demand for balances. Competitive...

We investigate a fiat money system introduced by the Bank of Amsterdam in 1683. Using data from the Amsterdam Municipal Archives, we partially reconstruct changes in the bank's balance sheet from 1666 through 1702. Our calculations show that the Bank of Amsterdam, founded in 1609, was engaged in...

We study an equilibrium asset pricing model with several Lucas (1978) trees subject toevent risk, that is, the possibility that trees experience unexpected disasters. We exploit themarket clearing mechanism, in the presence of multiple positive net supply assets, to showthat the implications of...

Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly...

We employ laboratory methods to study stability of competitive equilibrium in Scarf's economy (International Economic Review, 1960). Tatonnement theory predicts that prices are globally unstable for this economy, i.e. unless prices start at the competitive equilibrium they oscillate without...

The analytical starting point determines the course of a theoretical investigation and, ultimately, the productiveness of an approach. The classics took production and accumulation as their point of departure; the neoclassics, exchange. Exchange implies behavioral assumptions and notions like...

This paper analyzes one-good exchange economies with two infinitely-lived agents and incomplete markets. It is shown that there are no recursive (Markov) equilibria for which borrowing (debt) constraints never bind if the state space of exogenous and endogenous variables is a compact subset of...