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A Search-Theoretic Monetary Business Cycle Model with Capital Formation

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  • Menner Martin

    ()
    (Universidad Carlos III de Madrid, Spain)

Abstract

Search-theory has become the main paradigm for the micro-foundation of money. But no comprehensive business cycle analysis has been undertaken yet with a search-based monetary model. This paper extends the model with divisible goods and divisible money of Shi (JET, 1998) to allow for capital formation, analyses the monetary propagation mechanism and contrasts the model's implications with US business cycle stylized facts. The propagation mechanism based on a feedback between increased search intensity and depleted inventories only survives in the presence of non-negligible capital adjustment costs. With intermediate adjustment costs the model is able to replicate fairly well the volatility and cross-correlation with output of key US time series, including sales and inventory investment.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 1 (November)
Pages: 1-36

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Handle: RePEc:bpj:bejmac:v:contributions.6:y:2006:i:1:n:11

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Cited by:
  1. Chu, Angus C. & Lai, Ching-Chong & Liao, Chih-Hsing, 2012. "Search and endogenous growth: when Romer meets Lagos and Wright," MPRA Paper 36691, University Library of Munich, Germany.
  2. Christopher J. Waller, 2009. "Random matching and money in the neoclassical growth model: some analytical results," Working Papers 2009-034, Federal Reserve Bank of St. Louis.
  3. Chu, Angus C. & Kan, Kamhon & Lai, Ching-Chong & Liao, Chih-Hsing, 2014. "Money, random matching and endogenous growth: A quantitative analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 173-187.
  4. S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2007. "Money and capital," Working Paper 0714, Federal Reserve Bank of Cleveland.
  5. Martin Menner, 2011. ""Gesell Tax" and Efficiency of Monetary Exchange," Working Papers. Serie AD 2011-26, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  6. Piotr Ciżkowicz & Marcin Hołda & Andrzej Rzońca, 2009. "Inflation and investment in monetary growth models," Bank i Kredyt, National Bank of Poland, Economic Institute, vol. 40(6), pages 9-40.
  7. Shouyong Shi, 2006. "A Microfoundation of Monetary Economics," Working Papers tecipa-211, University of Toronto, Department of Economics.
  8. S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2009. "Money and capital: a quantitative analysis," Working Papers 2009-031, Federal Reserve Bank of St. Louis.
  9. Martin Menner, 2006. "Monetary Propagation In Search-Theoretic Monetary Models," Economics Working Papers we066426, Universidad Carlos III, Departamento de Economía.
  10. Cordelius Ilgmann, Martin Menner, . "Negative Nominal Interest Rates: History and Current Proposals," Working Papers 201143, Institute of Spatial and Housing Economics, Munster Universitary.

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