Wallace, N., (1974), "Can There Be a General Equilibrium Liquidity Preference Demand for Money?", Discussion Paper No. 51, Center for Economic Research, Department of Economics, University of Minnesota.
In "Liquidity Preference as Behavior Towards Risk," Tobin suggests that risk aversion and expected utility maximization can provide
a rigorous foundation for an equilibrium demand for money. In Tobin's
model, money plays a risk reducing role in individual portfolios. This
note considers whether a general equilibrium stochastic model can
produce equilibrium yield distributions that allow money to play that
role if money does not appear directly as an argument in the utility or
production functions of the economy. The model examined, a stochastic
production variant of Samuelson's model of overlapping generations, cannot
produce such yield distributions.
Can There Be a General Equilibrium Liquidity Preference Demand for Money?.
Center for Economic Research, Department of Economics, University of Minnesota.
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