COURNOT seminar – Daria Onori (LEDA, Université d’Orléans)
From 2:00pm to 3:30pm
Event details :
A Monetary Growth Model with Limited Foresight
co-written with Francesco MAGRIS and Daria ONORI
We analyze the equilibrium dynamics in a monetary growth model in which agents are endowed with limited foresight. Namely, in each period, the consumption and investment plans extend only for a limited number of periods and are reformulated in each subsequent period, giving rise to a kind of rolling myopic behavior. We show that, in the non monetary economy, the growth rate increases when the degree of limited foresight is relaxed, as a longer planning horizon enhances investment to finance far in time consumption. Furthermore, as soon as the degree of limited foresight approaches zero, the growth rate converges to that obtained in the infinite horizon model. When fiat money is introduced, monetary equilibria can exist provided that money supply is withdrawn at a constant rate. Under such an hypothesis, the growth rate of the economy is driven by the growth rate of money, and can be higher or lower than the growth rate of the infinite horizon optimal economy. The monetary equilibrium can be globally stable or unstable, according to the monetary rule. In the second case the non monetary steady state will represent a global attractor. Finally, we find the optimal monetary policy maximizing social welfare.
Link to the seminar webpage: https://beta-economics.fr/seminaire s-cournot-2023-2024/