In cash-in-advance models, necessary and sufficient conditions for the existence of an equilibrium with zero nominal interest rates and Pareto optimal allocations place restrictions only on the asymptotic behavior of the money supply.
According to Pareto, the distribution of income depends on "the nature of the people comprising a society, on the organization of the latter, and, also, in part, on chance."
This paper develops a method for combining the power of a dynamic, stochastic, general equilibrium model with the flexibility of a vector auto-regressive time-series model to obtain a hybrid that can be taken directly to the data.
