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An Axiomatic Characterization of the Price-Money Message Mechanism
Get PDF* Revised： [15-31, 2015]The axiomatic characterization of price or market equilibrium is one of the most important problems in the general equilibrium theory. There does not seem to exist, however, so many papers on the axiomatic characterization problem of monetary equilibrium. The overlapping-generations model with a double infinity of commodities and agents is one of the most fundamental frameworks for introducing money into an economic model, although a simple game-theoretic or welfare characterization on the role of money under competitive mechanism is widely known to be difficult. In this paper, we show that the informational efficiency axiomatic characterization as in Hurwicz (1960), Mount and Reiter (1974) and Sonnenschein (1974) is possible for the price-money competitive mechanism for overlapping-generations economies among the class of all allocation mechanisms with messages. Especially, the category theoretic universal mapping characterization in Sonnenschein (1974) is generalized and applied to the overlapping-generations framework through our monetary version of Debreu-Scarf's core limit theorem of Urai and Murakami (2015). Our argument is also closely related to the replica characterization approaches of Walrasian social choice mechanism like Thomson (1988) and Nagahisa (1994), and provide a comprehensive perspective on them
Inequality and Public Debt : A Positive Analysis
Get PDF* Revised： [15-01, 2015]This study extends the multi-country, politico-economic model of fiscal policy developed by Song, Storesletten, and Zilibotti (2012) to incorporate wage inequality within each country. In this extended framework, we present conflict within and across generations over fiscal policy and show that a low-inequality country realizes tight fiscal policy with low public debt accumulation, whereas a high-inequality country experiences loose fiscal policy with high public debt accumulation. This model prediction is consistent with empirical evidence from OECD countries for the past three decades
Debt Policy Rules in an Open Economy
Get PDF* Revised：Fiscal Sustainability, Macroeconomic Stability, and Welfare under Fiscal Discipline in a Small Open Economy [13-07, 2013]In a small open economy model of endogenous growth with public capital accumulation, we examine the effects of a debt policy rule under which the government must reduce its debt–GDP ratio if it exceeds the criterion level. To sustain public debt at a finite level, the government should adjust public spending rather than the income tax rate. The long run debt–GDP ratio should be kept sufficiently low to avoid equilibrium indeterminacy. Under sustainability and determinacy, a tighter (looser) debt rule brings welfare gains when the world interest rate is relatively high (low)
