Ohtaki, Eisei

Ozaki, Hiroyuki

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Title Monetary Equilibria and Knightian Uncertainty (MathematicalEconomics)Author(s)Ohtaki, Eisei; Ozaki, HiroyukiCitation数理解析研究所講究録 (2012), 1788: 61-61Issue Date2012-04URL http://hdl.handle.net/2433/172795RightType Departmental Bulletin PaperTextversionpublisherKyoto UniversityMonetary Equilibria and Knightian UncertaintyEisei Ohtaki \dagger Hiroyuki Ozaki \ddagger\dagger Faculty of Economics, Keio university, Mita 2-15-45, Minato-ku, Tokyo 108-8345, Japanemail address: ohtaki@gs.econ.keio.ac.jp\ddagger Faculty of Economics, Keio university, Mita 2-15-45, Minato-ku, Tokyo 108-8345, Japanemail address: ozaki@econ.keio.ac.jpOctober 15, 2011Summary: This paper studies a pure-endowment stochastic overlapping generationsmodel of monetary economy under uncertainty. One of finite number of shocksrealizes in each single period and, at each date-event, one new agent is born andlives for two dates. There are a single physical good at each event and an infinitelylived outside asset, fiat money. We model uncertainty by socalled multiple priors,that is, uncertainty is represented by not a single probability measure but a set ofprobability measures. A consumption stream is evaluated by concave utility indexfunctions, from which agents derive Gilboa-Schmeidler $s$ maxmin expected utilitypreferences.This paper achieves two objectives. First, we show that multiple stationary mon-etary equilibria exist and hence real indeterminacy arises when aggregate shocks ofendowment exist. Second, we show that each of these stationary monetary equilib-ria is conditionally Pareto optimal, that is, no other stationary allocations strictlyPareto dominate the equilibrium allocations.This paper also provides several numerical examples. Such examples indicate thatan increase in uncertainty enlarges not only indeterminacy of prices and allocationsbut also the range of economy in which indeterminacy is observed.Keywords: Money; Uncertainty; Maxmin expected utility; Indeterminacy; Opti-mality; Stochastic overlapping generations model.JEL Classification Numbers: D50; D62; D81; E40.1788 2012 p.61 61

Monetary Equilibria and Knightian Uncertainty (Mathematical Economics)

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Monetary Equilibria and Knightian Uncertainty (Mathematical Economics)

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