Search for a Monetary Propagation Mechanism
AbstractThis paper examines a monetary propagation mechanism in an economy where exchnages in goods and labor markets involve costly search. It is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state and output when the money growth rate is already high. The model produces persistent, hump-shaped responses in employment and output to money growth shocks even when the shocks have no persistence. The model also generates desirable features on job vacancy, sales, inventory, and the velocity of money. All these features emerge here in an economy with perfectly flexible prices and wages.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 81 (1998)
Issue (Month): 2 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622869
Other versions of this item:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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