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Abstract

This paper examines an environment where money is essential and agents exchange in perfectly-competitive, Walrasian markets. Agents consume and produce a homogeneous good, but hold money to purchase consumption in the event of a relatively low productivity shock. A Walrasian market delivers a non-degenerate distribution of money holdings across agents and avoids some of the computational difficulties associated with the market and pricing assumptions of bilateral matching and bargaining common to search-theoretic environments. The model is calibrated to long-run US velocity, and the welfare costs of inflation are assessed for variable buyer-seller ratios and persistent states of buying and selling.

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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): 52 (2011)
Issue (Month): 2 (05)
Pages: 407-423

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Handle: RePEc:ier:iecrev:v:52:y:2011:i:2:p:407-423

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• E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
• E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

References

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Citations

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Cited by:

1. Gabriele Camera & YiLi Chien, 2012. "Understanding the distributional impact of long-run inflation," Working Papers 2012-058, Federal Reserve Bank of St. Louis.
2. Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: methods," Staff Report 442, Federal Reserve Bank of Minneapolis.
   
   • Stephen Williamson & Randall Wright, 2010. "New monetarist economics: methods," Review, Federal Reserve Bank of St. Louis, issue May, pages 265-302.
   • Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Methods," MPRA Paper 21486, University Library of Munich, Germany.
3. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
   
   • Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96 Elsevier.
   • Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: models," Staff Report 443, Federal Reserve Bank of Minneapolis.
4. Scott J. Dressler, 2011. "A Long-Run, Short-Run and Politico-Economic Analysis of the Welfare Costs of Inflation," Villanova School of Business Department of Economics and Statistics Working Paper Series 16, Villanova School of Business Department of Economics and Statistics.

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