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Liquidity and real activity in three monetary models

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  • Don E. Schlagenhauf
  • Jeffrey M. Wrase

Abstract

This paper investigates interest rate determination and evolutions of nominal and real variables in alternative monetary, general equilibrium models. Three approaches to characterizing monetary transactions services are utilized: a cash-in-advance approach, in which agents face cash constraints on goods purchases; a transaction-cost approach, in which goods are sacrificed in transactions; and a shopping-time approach, in which leisure is sacrificed in transactions. Models which employ these approaches are used to examine liquidity effects of monetary innovations on interest rates and real activity.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Discussion Paper / Institute for Empirical Macroeconomics with number 68.

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Date of creation: 1992
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Handle: RePEc:fip:fedmem:68

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Related research

Keywords: Liquidity (Economics) ; Monetary policy;

References

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  1. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," American Economic Review, American Economic Association, vol. 82(2), pages 346-53, May.
  2. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
  3. Den Haan, Wouter J., 1990. "The optimal inflation path in a Sidrauski-type model with uncertainty," Journal of Monetary Economics, Elsevier, vol. 25(3), pages 389-409, June.
  4. Lawrence J. Christiano, 1990. "Computational algorithms for solving variants of Fuerst's model," Working Papers 467, Federal Reserve Bank of Minneapolis.
  5. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
  6. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
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Cited by:
  1. Dotsey, Michael & Ireland, Peter, 1995. "Liquidity Effects and Transactions Technologies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1441-57, November.
  2. W. Douglas McMillin & William D. Lastrapes, . "Cross-Country Variation in the Liquidity Effect," Departmental Working Papers 2001-04, Department of Economics, Louisiana State University.

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