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A Monetary Equilibrium Model with Transactions Costs

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  • Rotemberg, Julio J

Abstract

This paper presents the competitive equilibrium of an economy in which people hold money for transactions purposes. It studies both the steady states which result from different rates of monetary expansion and the effects of such non-steady state events as an open market operation. Even though the model features no uncertainty and perfect foresight, open market operations affect aggregate output. In particular, a simultaneous increase in money and governmental holdings of capital temporarily raises aggregate capital and output while it lowers the real rate of interest on capital.
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  • Rotemberg, Julio J, 1984. "A Monetary Equilibrium Model with Transactions Costs," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 40-58, February.
  • Handle: RePEc:ucp:jpolec:v:92:y:1984:i:1:p:40-58
    DOI: 10.1086/261207
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    1. Jean-Michel Grandmont & Yves Younes, 1973. "On the Efficiency of a Monetary Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(2), pages 149-165.
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    5. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
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    8. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
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    10. Mankiw, N. Gregory, 1981. "The permanent income hypothesis and the real interest rate," Economics Letters, Elsevier, vol. 7(4), pages 307-311.
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