This paper examines a monetary propagation mechanism in an economy where exchanges in goods and labor markets involve costly search. It is shown that an increase in the money growth rate increases steady state employment and output when the money growth rate is low but reduces steady state employment and output when the money growth is already high. The model produces persistent, hump-shaped responses in employment and output to money growth shocks even when the shocks have no persistence.
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number
966.
Find related papers by JEL classification: E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
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Benjamin Bental & Dominique Demougin, 2006.
"Incentive Contracts And Total Factor Productivity,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 1033-1055, 08.
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