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A unified framework for monetary theory and policy analysis

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  • Ricardo Lagos
  • Randall Wright

Abstract

Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions usually have strong assumptions that make them ill suited for discussing some policy questions, especially those concerning changes in the money supply. Hence, most policy analysis uses reduced-form models. The authors propose a framework, designed to help bridge this gap, that is based explicitly on microeconomic frictions, but allows for interesting macroeconomic policy analyses. At the same time, the model is analytically tractable and amenable to quantitative analysis.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0211.

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Date of creation: 2002
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Handle: RePEc:fip:fedcwp:0211

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Keywords: Money theory ; Monetary policy;

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References

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  11. S. Boragan Aruoba & Randall Wright, 2003. "Search, money, and capital: a neoclassical dichotomy," Proceedings, Federal Reserve Bank of Cleveland, pages 1085-1117.
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  20. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
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  27. Robert E. Lucas, Jr., 2000. "Inflation and Welfare," Econometrica, Econometric Society, vol. 68(2), pages 247-274, March.
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  29. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
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  34. Alvarez, Fernando & Stokey, Nancy L., 1998. "Dynamic Programming with Homogeneous Functions," Journal of Economic Theory, Elsevier, vol. 82(1), pages 167-189, September.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Optimal Monetary and Fiscal Policies In a Search-theoretic Model of Money and Unemployment
    by Christian Zimmermann in NEP-DGE blog on 2010-11-20 21:05:53
  2. Search Frictions and Asset Price Volatility
    by Christian Zimmermann in NEP-DGE blog on 2010-01-18 05:02:28
  3. Lagos-Wright with a New Keynesian Flavor!
    by paragwaknis in Musings of the Sorts on 2011-01-11 22:46:49
  4. Payment Systems in India
    by paragwaknis in Musings of the Sorts on 2012-08-05 21:20:51
  5. A Monetary Theory with Non-degenerate Distributions
    by Christian Zimmermann in NEP-DGE blog on 2013-09-09 00:45:08
  6. Teachable Moment
    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2013-12-02 00:19:00
  7. Secular Stagnation and Forgotten Monetary Economics
    by Stephen Williamson in Stephen Williamson: New Monetarist Economics on 2014-05-14 01:21:00
  8. Why Hold Money?
    by Agent Continuum in Agent Continuum on 2009-11-19 10:00:09
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