Browsing by Subject "Fiat money"
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Item Open Access Existence of competitive equilibrium under financial constraints and increasing returns(Bilkent University, 2000) Ata, H. NurIn this work we analyze the existence of equilibrium under increasing returns in a limited participation model. There arc two types of agents. Producer type has an increasing returns to scale (IRS) technology with no labor endowment while worker type has onh' labor endowment. Economy consists of three periods. At each period, due to cash-in-advance constraints imposed on factor purchases, goods market opens after the labor market closes. Total money stock is assumed to be constant. With this setup we were able to establish the existence and uniqueness of competitive equlibrium with increasing returns for the special case that the agent’s preferences are being represented by logarithmic utility.Item Open Access On the importance of sequencing of markets in monetary economies(Springer, 2003) Başçı, Erdem; Sağlam, İsmail; Sertel, M. R.; Koray, SemihThis paper studies money as working capital in a general equilibrium model. We argue that the way transactions are settled is the main determinant of the presence or lack of working capital in a cash-in-advance economy. In a production cycle, if the wage payments are made before sales proceeds are collected, firms have a financing need. This need alone brings, in a long run equilibrium, a deviation of real wages from marginal product of labor due to a ‘working capital premium’ in output prices. In contrast, if sales revenues can be collected before production costs are paid, then the working capital premium vanishes. These results are obtained in an economy with borrowing constraints, full equity financing, and optimal dividend policy.