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Lagos-Wright vs. Cash-in-Advance: Government Policy Response to War-Expenditure Shocks

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Listed author(s):
  • Fernando M. Martin

    (Simon Fraser University)

Abstract

I pit the Lagos-Wright micro founded model of money with the reduced-form cash-in-advance model in terms of their predictions for the response of government policy to war-expenditure shocks. The Lagos-Wright model performs well qualitative and quantitatively. Depending on specific assumptions about preferences, the cash-in-advance model either has some qualitative or quantitative shortcomings.

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File URL: https://economicdynamics.org/meetpapers/2011/paper_745.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 745.

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Date of creation: 2011
Handle: RePEc:red:sed011:745
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Fernando Martin, 2009. "A Positive Theory of Government Debt," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 608-631, October.
  2. David M. Arseneau & Ryan Chahrour & Sanjay K. Chugh & Alan Finkelstein Shapiro, 2015. "Optimal Fiscal and Monetary Policy in Customer Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(4), pages 617-672, 06.
  3. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
  4. Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96 Elsevier.
  5. Jones, Robert A, 1976. "The Origin and Development of Media of Exchange," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 757-775, August.
  6. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  7. Neil Wallace, 1998. "A dictum for monetary theory," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 20-26.
  8. Shouyong Shi, 1997. "A Divisible Search Model of Fiat Money," Econometrica, Econometric Society, vol. 65(1), pages 75-102, January.
  9. Arseneau, David M. & Chugh, Sanjay K., 2008. "Optimal fiscal and monetary policy with costly wage bargaining," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1401-1414, November.
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Cited by:

  1. Martin, Fernando M., 2015. "Debt, inflation and central bank independence," European Economic Review, Elsevier, vol. 79(C), pages 129-150.

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