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

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  • 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.

Suggested Citation

  • Fernando M. Martin, 2011. "Lagos-Wright vs. Cash-in-Advance: Government Policy Response to War-Expenditure Shocks," 2011 Meeting Papers 745, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:745
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    References listed on IDEAS

    as
    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.
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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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