This paper examines the influence of monetary policy on corporate economies, focusing on whether supply fluctuations affect the decisions of economic agents or whether money is neutral under specific conditions. To investigate this, we develop a two-period general equilibrium model with incomplete and production financial markets, capturing frictions and asymmetries typical of real financial systems. The model is then applied to a corporate finance context, analyzing a capital structure with a single owner. The findings show that monetary policy is generally not neutral when markets are incomplete. Neutrality of money emerges only as a special case when markets are fully complete and efficient, conditions rarely observed in practice. The equilibrium model demonstrates that monetary policy is not neutral or generally does not occur unless markets are complete. For the case of a single owner in a capital structure, Fisher’s separation theorem is valid, reinforcing the non-neutrality of money in this economy with markets and incomplete production.In other words, being in an incomplete exchange environment affects the path of consumption of economic agents, although it does not alter the firm âs operational framework. For future research, it would be relevant to extend the analysis time horizon, relax the assumption regarding currency carryover, incorporate private or public banks with fiscal policies into the model, and also consider the application of the Modigliani-Miller theorem
| Published in | Applied and Computational Mathematics (Volume 14, Issue 6) |
| DOI | 10.11648/j.acm.20251406.11 |
| Page(s) | 301-308 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
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Copyright © The Author(s), 2025. Published by Science Publishing Group |
Monetary Policy, Non-Neutrality of Money, Incomplete Markets, Corporate Finance
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APA Style
Moscareli, L. G., Tessmann, M. S., Pinto, A. C. (2025). Money and the Capital Structure of a Single Owner in Incomplete Markets with Production. Applied and Computational Mathematics, 14(6), 301-308. https://doi.org/10.11648/j.acm.20251406.11
ACS Style
Moscareli, L. G.; Tessmann, M. S.; Pinto, A. C. Money and the Capital Structure of a Single Owner in Incomplete Markets with Production. Appl. Comput. Math. 2025, 14(6), 301-308. doi: 10.11648/j.acm.20251406.11
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Download@article{10.11648/j.acm.20251406.11,
author = {Lucio Guimaraes Moscareli and Mathias Schneid Tessmann and Alex Cerqueira Pinto},
title = {Money and the Capital Structure of a Single Owner in Incomplete Markets with Production
},
journal = {Applied and Computational Mathematics},
volume = {14},
number = {6},
pages = {301-308},
doi = {10.11648/j.acm.20251406.11},
url = {https://doi.org/10.11648/j.acm.20251406.11},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.acm.20251406.11},
abstract = {This paper examines the influence of monetary policy on corporate economies, focusing on whether supply fluctuations affect the decisions of economic agents or whether money is neutral under specific conditions. To investigate this, we develop a two-period general equilibrium model with incomplete and production financial markets, capturing frictions and asymmetries typical of real financial systems. The model is then applied to a corporate finance context, analyzing a capital structure with a single owner. The findings show that monetary policy is generally not neutral when markets are incomplete. Neutrality of money emerges only as a special case when markets are fully complete and efficient, conditions rarely observed in practice. The equilibrium model demonstrates that monetary policy is not neutral or generally does not occur unless markets are complete. For the case of a single owner in a capital structure, Fisher’s separation theorem is valid, reinforcing the non-neutrality of money in this economy with markets and incomplete production.In other words, being in an incomplete exchange environment affects the path of consumption of economic agents, although it does not alter the firm âs operational framework. For future research, it would be relevant to extend the analysis time horizon, relax the assumption regarding currency carryover, incorporate private or public banks with fiscal policies into the model, and also consider the application of the Modigliani-Miller theorem},
year = {2025}
}
TY - JOUR T1 - Money and the Capital Structure of a Single Owner in Incomplete Markets with Production AU - Lucio Guimaraes Moscareli AU - Mathias Schneid Tessmann AU - Alex Cerqueira Pinto Y1 - 2025/11/10 PY - 2025 N1 - https://doi.org/10.11648/j.acm.20251406.11 DO - 10.11648/j.acm.20251406.11 T2 - Applied and Computational Mathematics JF - Applied and Computational Mathematics JO - Applied and Computational Mathematics SP - 301 EP - 308 PB - Science Publishing Group SN - 2328-5613 UR - https://doi.org/10.11648/j.acm.20251406.11 AB - This paper examines the influence of monetary policy on corporate economies, focusing on whether supply fluctuations affect the decisions of economic agents or whether money is neutral under specific conditions. To investigate this, we develop a two-period general equilibrium model with incomplete and production financial markets, capturing frictions and asymmetries typical of real financial systems. The model is then applied to a corporate finance context, analyzing a capital structure with a single owner. The findings show that monetary policy is generally not neutral when markets are incomplete. Neutrality of money emerges only as a special case when markets are fully complete and efficient, conditions rarely observed in practice. The equilibrium model demonstrates that monetary policy is not neutral or generally does not occur unless markets are complete. For the case of a single owner in a capital structure, Fisher’s separation theorem is valid, reinforcing the non-neutrality of money in this economy with markets and incomplete production.In other words, being in an incomplete exchange environment affects the path of consumption of economic agents, although it does not alter the firm âs operational framework. For future research, it would be relevant to extend the analysis time horizon, relax the assumption regarding currency carryover, incorporate private or public banks with fiscal policies into the model, and also consider the application of the Modigliani-Miller theorem VL - 14 IS - 6 ER -
Catholic University of Brasilia (UCB), Brasilia, Brazil
Postgraduate Department in Economics and Public Administration, Brazilian Institute of Education, Development and Research (IDP), Brasília, Brazil
Postgraduate Program in Administration (PPGA), University of Brasília (UNB), Brasília, Brazil
