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...

The relationship between risk and asset price fluctuations is studied in a stochastic overlapping generations asset pricing model with i.i.d. production shocks. The non-separability of preferences is an important factor in explaining the time paths of asset prices and returns. We show that the...

In this paper we characterize the set of Pareto optimal asset equilibria in a stochastic OLG-framework when real monetary shocks impinge on the economy. We show that it is the strength rather than the mere presence of monetary disturbances that accounts for, if the market mechanism fails to...

A version of the overlapping generations model is used to analyze consumer behavior and the properties of monetary equilibria if agents are faced with a nonlinear rate-of-return schedule on saving. Optimal individual decisions depend on economic parameters in a non-standard way. Unlike money...