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Short-Run and Long-Run Effects of Changes in Money in a Random-Matching Model

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  • Wallace, Neil

Abstract

A random-matching model of money is used to deduce the effects of a once-for-all change in the quantity of money. It is shown that the change has short-run effects that are predominantly real and long-run effects that are in the direction of being predominantly nominal provided that the change is random and people learn its realization only with a lag. The change in the quantity of money comes about through a random process of discovery that does not permit anyone to deduce the aggregate amount discovered when the change actually occurs. Copyright 1997 by the University of Chicago.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 105 (1997)
Issue (Month): 6 (December)
Pages: 1293-1307

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Handle: RePEc:ucp:jpolec:v:105:y:1997:i:6:p:1293-1307

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Cited by:
  1. Araujo, Luis & Shevchenko, Andrei, 2006. "Price dispersion, information and learning," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1197-1223, September.
  2. Klaus Rainer Schenk-Hoppé, . "Stochastic Tastes and Money in a Neo-Keynesian Economy," IEW - Working Papers 088, Institute for Empirical Research in Economics - University of Zurich.
  3. Brett Katzman & John Kennan & Neil Wallace, 1999. "Optimal Monetary Impulse-Response Functions in a Matching Model," NBER Working Papers 7425, National Bureau of Economic Research, Inc.
  4. Araujo, Luis & Camargo, Braz, 2006. "Information, learning, and the stability of fiat money," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1571-1591, October.
  5. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, 05.
  6. Besancenot, Damien & Rocheteau, Guillaume & Vranceanu, Radu, 2000. "Search, Price Illusion and Welfare," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 109-124, January.
  7. Luis Araujo & Braz Camargo, 2005. "Monetary Equilibrium with Decentralized Trade and Learning," UWO Department of Economics Working Papers 20051, University of Western Ontario, Department of Economics.
  8. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
  9. Faig, Miquel & Li, Zhe, 2009. "The welfare costs of expected and unexpected inflation," Journal of Monetary Economics, Elsevier, vol. 56(7), pages 1004-1013, October.
  10. Jones, Larry E. & Manuelli, Rodolfo E., 2001. "Volatile Policy and Private Information: The Case of Monetary Shocks," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 265-296, July.
  11. Katzman, Brett & Kennan, John & Wallace, Neil, 2003. "Output and price level effects of monetary uncertainty in a matching model," Journal of Economic Theory, Elsevier, vol. 108(2), pages 217-255, February.
  12. W A Razzak, 2001. "Money in the era of inflation targeting," Reserve Bank of New Zealand Discussion Paper Series DP2001/02, Reserve Bank of New Zealand.

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