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The Distribution of Money Balances and the Non-Neutrality of Money

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Author Info
Aleksander Berentsen
Gabriele Camera
Christopher Waller

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Abstract

Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate which keeps the models simple but precludes discussion of distributional effects of monetary policy. We generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically. We show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, while asymmetric injections may increase long-run output and welfare.

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Paper provided by Institute for Empirical Research in Economics - IEW in its series IEW - Working Papers with number iewwp220.

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Handle: RePEc:zur:iewwpx:220

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Keywords: distribution no-neutrality money balance

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A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines

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  16. repec:att:wimass:192011 is not listed on IDEAS
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