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The Distribution Of Money Balances And The Nonneutrality Of Money

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Author Info
Aleksander Berentsen
Gabriele Camera
C hristopher W aller

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Abstract

Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate-which keeps the models simple but precludes the discussion of distributional effects of monetary policy. We generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically. We show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, whereas asymmetric injections may increase long-run output and welfare. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 46 (2005)
Issue (Month): 2 (05)
Pages: 465-487
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Handle: RePEc:ier:iecrev:v:46:y:2005:i:2:p:465-487

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References listed on IDEAS
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  2. David K. Levine, 1991. "Asset Trading Mechanisms and Expansionary Policy," Levine's Working Paper Archive 43, David K. Levine. [Downloadable!]
  3. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
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  4. Levine, David K., 1991. "Asset trading mechanisms and expansionary policy," Journal of Economic Theory, Elsevier, vol. 54(1), pages 148-164, June. [Downloadable!] (restricted)
  5. Aleksander Berentsen, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 945-954, August. [Downloadable!] (restricted)
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  16. repec:att:wimass:192011 is not listed on IDEAS
  17. Stephen Williamson, 2004. "Limited participation, private money, and credit in a spatial model of money," Economic Theory, Springer, vol. 24(4), pages 857-875, November. [Downloadable!] (restricted)
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    • S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2007. "Money and capital," Working Paper 0714, Federal Reserve Bank of Cleveland. [Downloadable!]
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  20. Guillaume Rocheteau & Randall Wright, 2003. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," PIER Working Paper Archive 03-031, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
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  21. Scheinkman, Jose A & Weiss, Laurence, 1986. "Borrowing Constraints and Aggregate Economic Activity," Econometrica, Econometric Society, vol. 54(1), pages 23-45, January. [Downloadable!] (restricted)
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