Inflation and economic activity in a multiple matching model of money
This paper investigates the relationship between money growth, inflation, and productive activity in a general equilibrium model where search frictions motivate the transactions role of money. The use of a multiple matching technique, where search frictions are captured by limited consumption variety, allows us to study price determination in a search-theoretic environment with divisible money and goods. We find that in such a setting, a positive feedback between work and shopping effort decisions create a channel by which inflation can positively influence real activity. This feature also creates the possibility of multiple steady state equilibria. We also analyze the impact of inflation on capital accumulation, the role search frictions play in determining the extent to which inflation distorts relative prices, and the effect of money growth on firm entry on trade friction. In doing so, we demonstrate that a multiple matching model of money is amendable to study a wide range of traditional issues in monetary theory.
|Date of creation:||1998|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 442, St. Louis, MO 63166|
Web page: http://www.stlouisfed.org/
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
- Cooley, T.F. & Hansen, G.D., 1988.
"The Inflation Tax In A Real Business Cycle Model,"
88-05, Rochester, Business - General.
- Cooley, T.F. & Hansen, G.D., 1988. "The Inflation Tax In A Real Business Cycle Model," RCER Working Papers 155, University of Rochester - Center for Economic Research (RCER).
- Thomas F. Cooley & Gary D. Hansen, 1987. "The Inflation Tax in a Real Business Cycle Model," UCLA Economics Working Papers 496, UCLA Department of Economics.
- Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280.
- 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.
- Drazen, Allan, 1981. "Inflation and capital accumulation under a finite horizon," Journal of Monetary Economics, Elsevier, vol. 8(2), pages 247-260.
- Bennett T. McCallum & Marvin S. Goodfriend, 1988.
"Theoretical analysis of the demand of money,"
Federal Reserve Bank of Richmond, issue Jan, pages 16-24.
- Lucas, Robert Jr., 1990. "Liquidity and interest rates," Journal of Economic Theory, Elsevier, vol. 50(2), pages 237-264, April.
- Rogers, John H & Wang, Ping, 1993.
"Sources of Fluctuations in Relative Prices: Evidence from High Inflation Countries,"
The Review of Economics and Statistics,
MIT Press, vol. 75(4), pages 589-605, November.
- Rogers, J.H. & Wang, P., 1990. "Sources of Fluctuations in Relative Prices: Evidence from High Inflation Countries," Papers 12-90-2, Pennsylvania State - Department of Economics.
- Camera, G. & Corbae, D., 1998.
"Money and Price Dispersion,"
98-03, University of Iowa, Department of Economics.
- Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
- repec:att:wimass:9715 is not listed on IDEAS
- Li, Victor E., 1994. "Inventory accumulation in a search-based monetary economy," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 511-536, December.
- Trejos, Alberto & Wright, Randall, 1993.
"Search, Bargaining, Money and Prices: Recent Results and Policy Implications,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 25(3), pages 558-76, August.
- Alberto Trejos & Randall Wright, 1993. "Search, bargaining, money and prices: recent results and policy implications," Proceedings, Federal Reserve Bank of Cleveland, pages 558-584.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Edward J. Green & Ruilin Zhou, .
"A Rudimentary Model of Search with Divisible Money and Prices,"
Penn CARESS Working Papers
2772f94306e08ef7292945588, Penn Economics Department.
- Edward J. Green & Ruilin Zhou, . ""A Rudimentary Model of Search with Divisible Money and Prices''," CARESS Working Papres 95-17, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Diamond, Peter & Yellin, Joel, 1990. "Inventories and Money Holdings in a Search Economy," Econometrica, Econometric Society, vol. 58(4), pages 929-50, July.
- Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 477-496, December.
- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
- Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
- Stanley Fischer, 1983. "Inflation and Growth," NBER Working Papers 1235, National Bureau of Economic Research, Inc.
- Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
When requesting a correction, please mention this item's handle: RePEc:fip:fedlwp:1998-018. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao)
If references are entirely missing, you can add them using this form.