IDEAS home Printed from https://ideas.repec.org/p/rtv/ceisrp/394.html
   My bibliography  Save this paper

Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents

Author

Abstract

This paper shows that, in a pure currency economy with heterogeneous agents and multiple commodities, a pecuniary externality plays a key role in making the equilibrium allocation constrained inefficient. Monetary policy intervention can help improve matters.

Suggested Citation

  • Nicola Amendola & Leo Ferraris & Fabrizio Mattesini, 2016. "Optimal Monetary Policy in a Pure Currency Economy with Heterogenous Agents," CEIS Research Paper 394, Tor Vergata University, CEIS, revised 02 Feb 2017.
    • Handle: RePEc:rtv:ceisrp:394
    as

    Download full text from publisher

    File URL: https://ceistorvergata.it/RePEc/rpaper/RP394.pdf
    File Function: Main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Levine, David K., 1991. "Asset trading mechanisms and expansionary policy," Journal of Economic Theory, Elsevier, vol. 54(1), pages 148-164, June.
    2. Andolfatto, David, 2010. "Essential interest-bearing money," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1495-1507, July.
    3. John Geanakoplos & Heracles M. Polemarchakis, 1985. "Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete," Cowles Foundation Discussion Papers 764, Cowles Foundation for Research in Economics, Yale University.
    4. Moore, John, 2013. "Pecuniary Externality through Credit Constraints: Two Examples without Uncertainty," SIRE Discussion Papers 2013-71, Scottish Institute for Research in Economics (SIRE).
    5. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
    6. Lippi, Francesco & Ragni, Stefania & Trachter, Nicholas, 2015. "Optimal monetary policy with heterogeneous money holdings," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 339-368.
    7. Hart, Oliver D., 1975. "On the optimality of equilibrium when the market structure is incomplete," Journal of Economic Theory, Elsevier, vol. 11(3), pages 418-443, December.
    8. Neil Wallace, 2014. "Optimal money creation in "pure currency" economies: a conjecture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 259-274.
    9. Timothy J. Kehoe & David K. Levine & Michael Woodford, 1990. "The optimum quantity of money revisited," Working Papers 404, Federal Reserve Bank of Minneapolis.
    10. Boel, Paola & Waller, Christopher J., 2015. "On the Theoretical Efficacy of Quantitative Easing at the Zero Lower Bound," Working Paper Series 310, Sveriges Riksbank (Central Bank of Sweden).
    11. 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 750-777, October.
    12. Scheinkman, Jose A & Weiss, Laurence, 1986. "Borrowing Constraints and Aggregate Economic Activity," Econometrica, Econometric Society, vol. 54(1), pages 23-45, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rocheteau, Guillaume & Weill, Pierre-Olivier & Wong, Russell, 2018. "A tractable model of monetary exchange with ex-post heterogeneity," Theoretical Economics, Econometric Society, vol. 13(3), September.
    2. Lorenzo Carbonari & Fabrizio Mattesini & Robert J. Waldmann, 2023. "Inflation and Welfare in a Competitive Search Equilibrium with Asymmetric Information," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 717-746, June.
    3. Florin Bilbiie & Xavier Ragot, 2021. "Optimal Monetary Policy and Liquidity with Heterogeneous Households," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 41, pages 71-95, July.
    4. Krishna, R. Vijay & Leukhina, Oksana, 2019. "On the benefits of currency reform," Journal of Economic Dynamics and Control, Elsevier, vol. 102(C), pages 81-95.
    5. Nicola Amendola & Luis Araujo & Leo Ferraris, 2024. "Physical vs Digital Currency: What's the Difference, Why it Matters," Working Papers 537, University of Milano-Bicocca, Department of Economics.
    6. repec:spo:wpmain:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    7. Lippi, Francesco & Ragni, Stefania & Trachter, Nicholas, 2015. "Optimal monetary policy with heterogeneous money holdings," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 339-368.
    8. repec:hal:spmain:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    9. Levine, David K., 1989. "Infinite horizon equilibrium with incomplete markets," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 357-376, September.
    10. repec:spo:wpmain:info:hdl:2441/j7nncuouv9a0af4mubojrr2vc is not listed on IDEAS
    11. Yann Algan & Edouard Challe & Xavier Ragot, 2011. "Incomplete markets and the output–inflation tradeoff," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(1), pages 55-84, January.
    12. Xavier Ragot, 2018. "Limited Participation, Capital Accumulation and Optimal Monetary Policy," Working Papers hal-03444395, HAL.
    13. repec:hal:wpspec:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    14. Kurlat, Pablo, 2021. "Investment externalities in models of fire sales," Journal of Monetary Economics, Elsevier, vol. 122(C), pages 102-118.
    15. repec:spo:wpecon:info:hdl:2441/j75mfllkr89c8aod1nr586ksc is not listed on IDEAS
    16. Domeij, David & Ellingsen, Tore, 2015. "Rational Bubbles and Economic Crises: A Quantitative Analysis," SSE Working Paper Series in Economics 2015:1, Stockholm School of Economics.
    17. Markus K. Brunnermeier & Thomas M. Eisenbach & Yuliy Sannikov, 2012. "Macroeconomics with Financial Frictions: A Survey," Levine's Working Paper Archive 786969000000000384, David K. Levine.
    18. repec:hal:spmain:info:hdl:2441/58mqn6l8gc96n8lujj5560pkuf is not listed on IDEAS
    19. repec:spo:wpecon:info:hdl:2441/j7nncuouv9a0af4mubojrr2vc is not listed on IDEAS
    20. repec:hal:spmain:info:hdl:2441/j7nncuouv9a0af4mubojrr2vc is not listed on IDEAS
    21. Xavier Ragot & Florin O. Bilbiie, 2016. "Monetary Policy, Inflation, and Inequality: The Case for Helicopters," 2016 Meeting Papers 1663, Society for Economic Dynamics.
    22. Francesco Lippi & Stefania Ragni & Nicholas Trachter, 2013. "State dependent monetary policy," Working Paper 13-17, Federal Reserve Bank of Richmond.
    23. Yann Algan & Edouard Challe & Xavier Ragot, 2011. "Incomplete markets and the output–inflation tradeoff," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 46(1), pages 55-84, January.
    24. Yann Algan & Edouard Challe & Xavier Ragot, 2008. "Incomplete Markets and the Output-inflation Tradeoff," Working Papers hal-01066163, HAL.
    25. repec:hal:wpspec:info:hdl:2441/j7nncuouv9a0af4mubojrr2vc is not listed on IDEAS
    26. Hu, Tai-Wei & Shmaya, Eran, 2019. "Unique monetary equilibrium with inflation in a stationary Bewley–Aiyagari model," Journal of Economic Theory, Elsevier, vol. 180(C), pages 368-382.
    27. Berentsen, Aleksander & Huber, Samuel & Marchesiani, Alessandro, 2016. "The societal benefit of a financial transaction tax," European Economic Review, Elsevier, vol. 89(C), pages 303-323.
    28. Dimitrios Tsomocos, 2003. "Equilibrium analysis, banking, contagion and financial fragility," FMG Discussion Papers dp450, Financial Markets Group.
    29. Sergio Turner, 2004. "Pareto Improving Taxation in Incomplete Markets," Econometric Society 2004 Latin American Meetings 310, Econometric Society.

    More about this item

    Keywords

    Money; Heterogeneity; Pecuniary Externality; Monetary Policy;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:394. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Barbara Piazzi (email available below). General contact details of provider: https://edirc.repec.org/data/csrotit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.