INTERPRETING A STOCHASTIC MONETARY GROWTH-MODEL AS A MODIFIED SOCIAL PLANNERS PROBLEM

Using a stochastic cash-in-advance growth model similar to that studie d by Cooley and Hansen (1989), it is demonstrated that the competitive , monetary equilibrium can be expressed as the solution to a modified social planner's problem. Hence, by employing standard dynamic optimiz ation techniques and the second welfare theorem to the modified social planner's problem, the equilibrium of the monetary economy can be stu died.