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Some Benefits of Cyclical Monetary Policy

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  • Cavalcanti, Ricardo de Oliveira
  • Nosal, Ed

Abstract

Should monetary policy be cyclical? The debate around this question is old but has benefited very little from research on the pure theory of money. In our model, people trade in pairs, without double coincidence of wants and face seasonal fluctuations. Monetary policy is restricted to taxing money holdings in one period and redistributing in the next period the proceeds in a lump sum fashion. We demonstrate that under some very general conditions the cyclical creation and destruction of money is benefical to society

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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 603.

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Date of creation: 01 Oct 2005
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Handle: RePEc:fgv:epgewp:603

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  1. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  2. David K. Levine, 1991. "Asset Trading Mechanisms and Expansionary Policy," Levine's Working Paper Archive 43, David K. Levine.
  3. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
  4. Sargent, Thomas J & Wallace, Neil, 1982. "The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1212-36, December.
  5. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  6. Ricardo O. Cavalcanti, 2004. "A monetary mechanism for sharing capital: Diamond and Dybvig meet Kiyotaki and Wright," Economic Theory, Springer, vol. 24(4), pages 769-788, November.
  7. Li, Victor E, 1995. "The Optimal Taxation of Fiat Money in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 927-42, November.
  8. Ricardo Cavalcanti & Andres Erosa & Ted Temzelides, 1998. "Private Money and Reserve Management in a Random Matching Model," Macroeconomics 9803008, EconWPA.
  9. Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
  10. Cavalcanti, Ricardo de Oliveira, 2003. "A monetary mechanism for sharing capital: Diamond and Dybvig meet Kiyotaki and Wright," Economics Working Papers (Ensaios Economicos da EPGE) 476, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  11. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  12. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
  13. Miron, Jeffrey A, 1986. "Financial Panics, the Seasonality of the Nominal Interest Rate, and theFounding of the Fed," American Economic Review, American Economic Association, vol. 76(1), pages 125-40, March.
  14. Scheinkman, Jose A & Weiss, Laurence, 1986. "Borrowing Constraints and Aggregate Economic Activity," Econometrica, Econometric Society, vol. 54(1), pages 23-45, January.
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Cited by:
  1. Flôres Junior, Renato Galvão & Fontoura, Maria Paula & Santos, Rogério Guerra, 2006. "Foreign direct investment spillovers in Portugal: additional lessons from a country study," Economics Working Papers (Ensaios Economicos da EPGE) 618, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  2. Flôres Junior, Renato Galvão, 2006. "Dois ensaios sobre diversidade cultural e o comércio de serviços," Economics Working Papers (Ensaios Economicos da EPGE) 622, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  3. Ricardo Cavalcanti & Ed Nosal, 2011. "Counterfeiting as Private Money in Mechanism Design," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 625-636, October.
  4. Cysne, Rubens Penha, 2006. "An Intra-Household Approach to the Welfare Costs of Inflation (Revised Version, Forthcoming 2006, Estudos Econômicos)," Economics Working Papers (Ensaios Economicos da EPGE) 612, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  5. Guillaume Rocheteau, 2011. "The cost of inflation: a mechanism design approach," Working Paper 1103, Federal Reserve Bank of Cleveland.
  6. Monteiro, Paulo Klinger, 2004. "First-Price auction symmetric equlibria with a general distribution," Economics Working Papers (Ensaios Economicos da EPGE) 568, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  7. Cysne, Rubens Penha, 2006. "Income Inequality in a Job-Search Model With Heterogeneous Discount Factors (Revised Version, Forthcoming 2006, Revista Economia)," Economics Working Papers (Ensaios Economicos da EPGE) 611, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  8. Ricardo de O. Calacanti, 2010. "Inside-money theory after Diamond and Dybvig," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 59-82.
  9. Guillaume Rocheteau, 2011. "On the coexistence of money and higher-return assets and its social role," Working Paper 1104, Federal Reserve Bank of Cleveland.
  10. Aloisio Araujo & Mário R. Páscoa & Juan Pablo Torres-Martínez, 2006. "Bubbles, Collateral and Monetary Equilibrium," Levine's Working Paper Archive 122247000000001055, David K. Levine.
  11. Flôres Junior, Renato Galvão & Watanuki, Masakazu, 2006. "Integration Options for Mercosul - An Investigation Using the AMIDA Model," Economics Working Papers (Ensaios Economicos da EPGE) 610, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  12. Flôres Junior, Renato Galvão, 2006. "The Diversity of Diversity: further methodological considerations on the use of the concept in cultural economics," Economics Working Papers (Ensaios Economicos da EPGE) 626, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  13. Araújo, Fabio & Issler, João Victor & Fernandes, Marcelo, 2006. "A Stochastic Discount Factor Approach to Asset Pricing Using Panel Data," Economics Working Papers (Ensaios Economicos da EPGE) 628, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  14. Rivano, Ricardo de Oliveira & Wallace, Neil, 2006. "New models of old(?) payment questions," Economics Working Papers (Ensaios Economicos da EPGE) 619, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).

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