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Reallocation of production inputs in a monetary economy

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  • Tanaka, Yoshitaka

Abstract

This paper explains the return correlation between money and competing assets, the coexistence puzzle, and the effect of inflation on output. As the model allows sellers to use lands as an input, buyers’ portfolios can rebalance from money to land in response to inflation expanding sellers’ production, which explains the positive correlation between output and inflation and the negative correlation between the return on money and land. Although the return on money is dominated by land, both assets are used in equilibrium.

Suggested Citation

  • Tanaka, Yoshitaka, 2019. "Reallocation of production inputs in a monetary economy," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    • Handle: RePEc:eee:ecolet:v:183:y:2019:i:c:27
    DOI: 10.1016/j.econlet.2019.108563
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    References listed on IDEAS

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    More about this item

    Keywords

    Money; Monetary policy; Search; Liquidity;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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