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The Monetary Transmission Mechanism

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  • Benhabib, J.
  • Farmer, R.E.A.

Abstract

Most authors have attributed the real effects of money in the short run either to mistaken expectations or to non-market clearing or both. In this paper we argue that neither of these channels is needed to explain the facts. We show that a competitive market clearing model in which money enters the production function is fully capable of mimicking the broad features of the data. Our argument relies on an explanation of "price stickiness" that exploits a multiplicity of equlibria in a rational expectations model.

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File URL: http://econ.as.nyu.edu/docs/IO/9383/RR96-13.PDF
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Bibliographic Info

Paper provided by C.V. Starr Center for Applied Economics, New York University in its series Working Papers with number 96-13.

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Length: 24 pages
Date of creation: 1996
Date of revision:
Handle: RePEc:cvs:starer:96-13

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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
Phone: (212) 998-8936
Fax: (212) 995-3932
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Web page: http://econ.as.nyu.edu/object/econ.cvstarr.html
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Postal: C.V. Starr Center, Department of Economics, New York University, 19 W. 4th Street, 6th Floor, New York, NY 10012
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Related research

Keywords: BUSINESS CYCLES; MONETARY POLICY; CENTRAL BANKS; MONEY; INTEREST RATE;

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