The real value of money under endogenous beliefs

We study an overlapping generations model where the level of confidence in money evolves endogenously as a function of aggregate real money balances. The economy can display multiple stationary equilibria where the aggregate bubble on money is stochastic and the level of confidence is partial. Steady states can be ranked by the degree of confidence, with more inefficiency being associated with less confidence. It is only under certain restrictions that the Golden Rule constitutes a steady state for the system. Autarky becomes unstable and complex dynamics such as cycles and chaos can emerge even under gross substitutability