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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. 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.
  2. 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.
  3. Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: models," Staff Report 443, Federal Reserve Bank of Minneapolis.
  4. Amador, Manuel & Weill, Pierre-Olivier, 2012. "Learning from private and public observations of othersʼ actions," Journal of Economic Theory, Elsevier, vol. 147(3), pages 910-940.
  5. 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.
  6. Katzman,B. & Kennan,J. & Wallace,N., 2001. "Output and price level effects of monetary uncertainty in a matching model," Working papers 1, Wisconsin Madison - Social Systems.
  7. 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.
  8. Aleksander Berentsen & Gabriele Camera & Christopher Waller, . "The Distribution of Money Balances and the Non-Neutrality of Money," IEW - Working Papers 220, Institute for Empirical Research in Economics - University of Zurich.
  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. 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.
  11. Araujo, Luis & Shevchenko, Andrei, 2006. "Price dispersion, information and learning," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1197-1223, September.
  12. 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.
  13. Besancenot, Damien & Rocheteau, Guillaume & Vranceanu, Radu, 2000. "Search, Price Illusion and Welfare," Journal of Macroeconomics, Elsevier, vol. 22(1), pages 109-124, January.

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