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Inside Money, Output, and Inventories in a Business Cycle

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  • Giovanna Mossetti

Abstract

This paper describes a dynamic general equilibrium asset-pricing model of a competitive monetary economy with a storable good and a cash-in-advance constraint where output, inside money, and inventories are endogenously determined. Inventories allow firms to react to high (low) productivity states by increasing (decreasing) production in good (bad) times. In response to a temporary change in the productivity of labor: inside money and output are positively and serially correlated, with inside money changing before output; output fluctuates more than sales, and prices fluctuate less in a flexible price model with no storage.

Suggested Citation

  • Giovanna Mossetti, 1990. "Inside Money, Output, and Inventories in a Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 23(2), pages 381-399, May.
    • Handle: RePEc:cje:issued:v:23:y:1990:i:2:p:381-99
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    Cited by:

    1. Ms. Mwanza Nkusu, 2003. "Interest Rates, Credit Rationing, and Investment in Developing Countries," IMF Working Papers 2003/063, International Monetary Fund.
    2. Paraskevopoulos, Christos C. & Paschakis, John & Smithin, John, 1996. "Is monetary sovereignty an option for the small open economy?," The North American Journal of Economics and Finance, Elsevier, vol. 7(1), pages 5-18.

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