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A Unified Framework for Monetary Theory and Policy Analysis

  • Ricardo Lagos
  • Randall Wright

Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions usually have strong assumptions that make them ill suited for discussing some policy questions, especially those concerning changes in the money supply. Hence, most policy analysis uses reduced-form models. The authors propose a framework, designed to help bridge this gap, that is based explicitly on microeconomic frictions, but allows for interesting macroeconomic policy analyses. At the same time, the model is analytically tractable and amenable to quantitative analysis.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 113 (2005)
Issue (Month): 3 (June)
Pages: 463-484

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Handle: RePEc:ucp:jpolec:v:113:y:2005:i:3:p:463-484
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