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Search, money and capital: a neoclassical dichotomy

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Author Info
S. Boragan Aruoba
Randall Wright

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Abstract

Recent work has reduced the gap between search-based monetary theory and mainstream macroeconomics by incorporating into the search model some centralized markets as well as some decentralized markets where money is essential. This paper takes a further step towards this integration by introducing labor, capital and neoclassical firms. The resulting framework nests the search-theoretic monetary model and a standard neoclassical growth model as special cases. Perhaps surprisingly, it also exhibits a dichotomy: one can determine the equilibrium path for the value of money independently of the paths of consumption, investment and employment in the centralized market.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0208.

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Date of creation: 2002
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Handle: RePEc:fip:fedcwp:0208

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Keywords: Monetary theory ; Macroeconomics;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Lagos, Ricardo & Wright, Randall, 2003. "Dynamics, cycles, and sunspot equilibria in 'genuinely dynamic, fundamentally disaggregative' models of money," Journal of Economic Theory, Elsevier, vol. 109(2), pages 156-171, April. [Downloadable!] (restricted)
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  2. Nobuhiro Kiyotaki & John Moore, 2004. "Liquidity, Bussiness Cycles and Monetary Policy," ESE Discussion Papers 113, Edinburgh School of Economics, University of Edinburgh.
  3. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February. [Downloadable!] (restricted)
  4. Rogerson, Richard, 1988. "Indivisible labor, lotteries and equilibrium," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 3-16, January. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Prakash Kannan, 2007. "On the Welfare Benefits of an International Currency," IMF Working Papers 07/49, International Monetary Fund. [Downloadable!]
    Other versions:
  2. Randall Wright, 2005. "Introduction to "Models of Monetary Economies II: The Next Generation"," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Oct, pages 2-9.
    Other versions:
  3. Ricardo Lagos & Randall Wright, 2004. "A unified framework for monetary theory and policy analysis," Staff Report 346, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  4. Rocheteau, Guillaume & Rupert, Peter & Shell, Karl & Wright, Randall, 2005. "General Equilibrium with Nonconvexities, Sunspots, and Money," Working Papers 05-16, Cornell University, Center for Analytic Economics. [Downloadable!]
    Other versions:
  5. Guillaume Rocheteau, 2008. "Money and competing assets under private information," Working Paper 0802, Federal Reserve Bank of Cleveland. [Downloadable!]
  6. Christopher J. Waller, 2009. "Random matching and money in the neoclassical growth model: some analytical results," Working Papers 2009-034, Federal Reserve Bank of St. Louis. [Downloadable!]
  7. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb. [Downloadable!]
  8. Guillaume Rocheteau & Peter Rupert & Randall Wright, 2007. "Inflation and Unemployment in General Equilibrium," University of California at Santa Barbara, Economics Working Paper Series 07-07, Department of Economics, UC Santa Barbara. [Downloadable!]
    Other versions:
  9. Randall Wright & Guillame Rocheteau, 2003. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," Levine's Bibliography 666156000000000302, UCLA Department of Economics. [Downloadable!]
    Other versions:
  10. Ben Craig & Guillaume Rocheteau, 2006. "Inflation and welfare: a search approach," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Jan. [Downloadable!]
    Other versions:
  11. Ricardo Lagos & Guillaume Rocheteau, 2006. "Money and capital as competing media of exchange," Working Paper 0608, Federal Reserve Bank of Cleveland. [Downloadable!]
    Other versions:
  12. Ricardo Lagos, 2008. "The Research Agenda: Ricardo Lagos on Liquidity and the Search Theory of Money," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 10(1), November. [Downloadable!]
  13. S. Boragan Aruoba & Christopher J. Waller & Randall Wright, 2009. "Money and capital: a quantitative analysis," Working Papers 2009-031, Federal Reserve Bank of St. Louis. [Downloadable!]
  14. Laura Veldkamp & Chris Edmond, 2006. "Income Dispersion, Asymmetric Information and Fluctuations in Market Efficiency," Working Papers 06-13, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
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  15. S. Boragan Aruoba & Sanjay K. Chugh, 2006. "Optimal fiscal and monetary policy when money is essential," International Finance Discussion Papers 880, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  16. Guillaume Rocheteau, 2009. "A monetary approach to asset liquidity," Working Paper 0901, Federal Reserve Bank of Cleveland. [Downloadable!]
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