Trade is both uncertain and sequential. Money surprises are not neutral because prices at the beginning of the trading process cannot depend on its end. In contrast with fixed-price models, in this paper sellers can change prices during trade. In contrast with Robert E. Lucas's article, here there is no asymmetry in the information about the money supply. The price quoted by individual sellers may adjust slowly to changes in the targeted money supply but the distribution of quoted prices adjusts perfectly to these changes and the real price distribution is independent of the anticipated rate of change in the money supply. Copyright 1994 by University of Chicago Press.
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Boyan Jovanovic & Masako Ueda, 1996.
"Contracts and Money,"
NBER Working Papers
5637, National Bureau of Economic Research, Inc.
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Jovanovic, B. & Ueda, M., 1996.
"Contracts and Money,"
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96-23, C.V. Starr Center for Applied Economics, New York University.
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