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Monetary policy with linear information costs

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  • Dimitris Voliotis

Abstract

The paper adresses the problem of a monetary economy with costs of information, imposed in linear form. In particular, we make use of a strategic market game with money where equilibria are standardly non-Walrasian, permitting an active role to monetary policy. The imposition of information costs alters the demand of real balances since traders demand extra money for gathering and processing the necessary information. As a result, money injections could be proved welfare improving only when the induced information costs do not offset the resulted gains to trade. Copyright Springer-Verlag 2013

Suggested Citation

  • Dimitris Voliotis, 2013. "Monetary policy with linear information costs," Journal of Economics, Springer, vol. 110(3), pages 241-256, November.
    • Handle: RePEc:kap:jeczfn:v:110:y:2013:i:3:p:241-256
    DOI: 10.1007/s00712-012-0299-z
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    References listed on IDEAS

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    1. Pradeep Dubey & John Geanakoplos, 2000. "Inside and Outside Money, Gains to Trade, and IS-LM," Cowles Foundation Discussion Papers 1257, Cowles Foundation for Research in Economics, Yale University.
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    More about this item

    Keywords

    Central Bank; Transaction costs; Gains to trade; D50; E48; E50; E58;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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