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The Monetary Transmission Mechanism

  • Jess Benhabib
  • Roger Farmer

Since the writing of David Hume, in the eighteenth century, there has been a general agreement amogst economists that an increase in the stock of money leads, initially, to an increase in economic activity. Most writer have attributed the real effects of money, in the short run, to mistaken expectations, non-market clearing or both. We argue instead, that neither of these channels is needed to explain the facts. We show that a competitive market-clearing model in which money enter the production function can reproduce the broad features of data.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 2055.

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Date of creation: 05 Mar 1998
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Handle: RePEc:cla:levarc:2055
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  1. Benhabib, Jess & Bull, Clive, 1981. "The Optimal Quantity of Money: A Formal Treatment," Working Papers 81-11, C.V. Starr Center for Applied Economics, New York University.
  2. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 1998. "Sticky price models of the business cycle: can the contract multiplier solve the persistence problem?," Staff Report 217, Federal Reserve Bank of Minneapolis.
  3. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1997. "Sticky price and limited participation models of money: A comparison," European Economic Review, Elsevier, vol. 41(6), pages 1201-1249, June.
  4. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
  5. Ascari, G. & Garcia, J.A., 1999. "Relative Wage Concern and the Keynesian Contract Multiplier," Economics Working Papers eco99/5, European University Institute.
  6. Farmer, Roger E A, 1991. "Sticky Prices," Economic Journal, Royal Economic Society, vol. 101(409), pages 1369-79, November.
  7. Miles S. Kimball, 1995. "The Quantitative Analytics of the Basic Neomonetarist Model," NBER Working Papers 5046, National Bureau of Economic Research, Inc.
  8. Lawrence J. Christiano & Martin Eichenbaum, 1992. "Liquidity Effects and the Monetary Transmission Mechanism," NBER Working Papers 3974, National Bureau of Economic Research, Inc.
  9. Obstfeld, Maurice & Rogoff, Kenneth, 1983. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 675-87, August.
  10. Woodford, Michael, 1994. "Monetary Policy and Price Level Determinacy in a Cash-in-Advance Economy," Economic Theory, Springer, vol. 4(3), pages 345-80.
  11. Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
  12. Brock, William A, 1974. "Money and Growth: The Case of Long Run Perfect Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(3), pages 750-77, October.
  13. Benhabib, Jess & Farmer, Roger E.A., 1991. "Indeterminacy and Increasing Returns," Working Papers 91-59, C.V. Starr Center for Applied Economics, New York University.
  14. Kiminori Matsuyama, 1988. "Endogenous Price Fluctuations in an Optimizing Model of Monetary Economy," Discussion Papers 825, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  15. Jeanne, Olivier, 1998. "Generating real persistent effects of monetary shocks: How much nominal rigidity do we really need?," European Economic Review, Elsevier, vol. 42(6), pages 1009-1032, June.
  16. Calvo, Guillermo A, 1979. "On Models of Money and Perfect Foresight," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(1), pages 83-103, February.
  17. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
  18. Benhabib, Jess & Farmer, Roger, 1991. "The Aggregate Effects of Monetary Externalities," Working Papers 91-24, C.V. Starr Center for Applied Economics, New York University.
  19. Roger E.A. Farmer, 1994. "The Econometrics of Indeterminacy: An Applied Study," UCLA Economics Working Papers 720, UCLA Department of Economics.
  20. Farmer, Roger E A, 1991. "The Lucas Critique, Policy Invariance and Multiple Equilibria," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 321-32, April.
  21. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126 National Bureau of Economic Research, Inc.
  22. Hoffman, Dennis L. & Rasche, Robert H. & Tieslau, Margie A., 1995. "The stability of long-run money demand in five industrial countries," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 317-339, April.
  23. Farmer, R.E.A., 1999. "Two New Keynesian Theories of Sticky Prices," Economics Working Papers eco99/33, European University Institute.
  24. Farmer, Roger E. A., 1992. "Nominal price stickiness as a rational expectations equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 317-337, April.
  25. Jess Benhabib & Richard Rogerson & Randall Wright, 1991. "Homework in macroeconomics: household production and aggregate fluctuations," Staff Report 135, Federal Reserve Bank of Minneapolis.
  26. Mankiw, N Gregory & Rotemberg, Julio J & Summers, Lawrence H, 1985. "Intertemporal Substitution in Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 225-51, February.
  27. Kenneth J. Matheny, 1998. "Non-neutral responses to money supply shocks when consumption and leisure are Pareto substitutes," Economic Theory, Springer, vol. 11(2), pages 379-402.
  28. Farmer, Roger E. A., 1988. "What is a liquidity crisis?," Journal of Economic Theory, Elsevier, vol. 46(1), pages 1-15, October.
  29. repec:cup:macdyn:v:4:y:2000:i:1:p:74-107 is not listed on IDEAS
  30. Laurence Ball & David Romer, 1987. "Real Rigidities and the Non-Neutrality of Money," NBER Working Papers 2476, National Bureau of Economic Research, Inc.
  31. Farmer, Roger E.A. & Woodford, Michael, 1997. "Self-Fulfilling Prophecies And The Business Cycle," Macroeconomic Dynamics, Cambridge University Press, vol. 1(04), pages 740-769, December.
  32. Ascari, G., 1997. "Optimizing Agents, Staggered Wages and Persistence in the Real Effects of Money Shocks," The Warwick Economics Research Paper Series (TWERPS) 486, University of Warwick, Department of Economics.
  33. repec:cup:macdyn:v:1:y:1997:i:4:p:740-69 is not listed on IDEAS
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