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Monetary shocks in a spatial overlapping generations model

  • Anthonisen, Niels
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    In a classic paper, "The Lag in Effect of Monetary Policy," Friedman (1961) describes an expansionary open market operation as diffusing across the economy, pulling the price in one market out of line with the price in the next market as it spreads. The objective of this paper is to build a model where this process is made explicit, specifically, where money affects real economic activity by altering relative prices of goods as it spills from one market into the next. Thus the paper superimposes a monetary overlapping generations model on a simple abstract spatial structure--specifically, a graph--and then studies the effect of an expansionary monetary policy.

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    File URL: http://www.sciencedirect.com/science/article/B6V85-50GWN3C-2/2/e312856c4400527743ee522a596809d2
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    Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

    Volume (Year): 34 (2010)
    Issue (Month): 12 (December)
    Pages: 2461-2484

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    Handle: RePEc:eee:dyncon:v:34:y:2010:i:12:p:2461-2484
    Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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    1. Ricardo Lagos & Randall Wright, 2004. "A unified framework for monetary theory and policy analysis," Staff Report 346, Federal Reserve Bank of Minneapolis.
    2. Shouyong Shi, 2006. "Viewpoint: A microfoundation of monetary economics," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 643-688, August.
    3. Stephen D. Williamson, 2005. "Monetary Policy and Distribution," 2005 Meeting Papers 379, Society for Economic Dynamics.
    4. Shouyong Shi, 2006. "A Microfoundation of Monetary Economics," Working Papers tecipa-211, University of Toronto, Department of Economics.
    5. Mark Bils & Peter J. Klenow, 2002. "Some Evidence on the Importance of Sticky Prices," NBER Working Papers 9069, National Bureau of Economic Research, Inc.
    6. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity effects and the monetary transmission mechanism," Staff Report 150, Federal Reserve Bank of Minneapolis.
    7. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
    8. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
    9. Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
    10. Milton Friedman, 1961. "The Lag in Effect of Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 69, pages 447.
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