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Money, interest, and capital in a cash-in-advance economy

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Abstract

A cash-in-advance constraint on consumption is incorporated into a standard model of consumption and capital accumulation. Monetary policy consists of lump-sum cash transfers. Methods are developed for establishing the existence and uniqueness of an equilibrium. and for explicitly constructing this equilibrium. The model economy's dependence on monetary policy is explored.

Suggested Citation

  • Wilbur John Coleman, 1988. "Money, interest, and capital in a cash-in-advance economy," International Finance Discussion Papers 323, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:323
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    4. Lucas, Robert E, Jr & Stokey, Nancy L, 1987. "Money and Interest in a Cash-in-Advance Economy," Econometrica, Econometric Society, vol. 55(3), pages 491-513, May.
    5. Fischer, Stanley, 1979. "Anticipations and the Nonneutrality of Money," Journal of Political Economy, University of Chicago Press, vol. 87(2), pages 225-252, April.
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    7. Lucas, Robert E, Jr, 1980. "Equilibrium in a Pure Currency Economy," Economic Inquiry, Western Economic Association International, vol. 18(2), pages 203-220, April.
    8. Thomas J. Sargent, 1973. "Rational Expectations, the Real Rate of Interest, and the Natural Rate of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(2), pages 429-480.
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    11. 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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    Cited by:

    1. Christiano, Lawrence J. & Fisher, Jonas D. M., 2000. "Algorithms for solving dynamic models with occasionally binding constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 24(8), pages 1179-1232, July.
    2. Dotsey, Michael & Ireland, Peter, 1996. "The welfare cost of inflation in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 37(1), pages 29-47, February.
    3. Salyer, Kevin D., 1996. "Interpreting a stochastic monetary growth model as a modified social planner's problem," Journal of Economic Dynamics and Control, Elsevier, vol. 20(4), pages 681-689, April.
    4. Greenwood, Jeremy & Huffman, Gregory W., 1991. "Tax analysis in a real-business-cycle model : On measuring Harberger triangles and Okun gaps," Journal of Monetary Economics, Elsevier, vol. 27(2), pages 167-190, April.
    5. Ingram, B., 1990. "Post Econometric Policy Evaluation : A Critique," Working Papers 90-30, University of Iowa, Department of Economics.
    6. Jeremy Greenwood & Zvi Hercowitz, 1990. "The allocation of goods and time over the business cycle," Discussion Paper / Institute for Empirical Macroeconomics 26, Federal Reserve Bank of Minneapolis.

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