Posted Content•
Search, Limited Participation, and Monetary Policy
TL;DR: In this paper, the authors developed a model that employs recent developments in the literature on search models of money to capture the distributional effects of monetary policy in a tractable way.
Abstract: A model is developed that employs recent developments in the literature on search models of money to capture the distributional effects of monetary policy in a tractable way. Deterministic and stochastic versions of the model are studied. Money is not neutral, and these non-neutralities persist, whether or not the change in the money supply is anticipated or unanticipated. At the optimum, monetary policy is geared to correcting distortions in the search sector of the economy, while correcting for the persistent effects of past monetary policy actions
Citations
More filters
TL;DR: The authors generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically, and show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, whereas asymmetric injection may increase long-run income and welfare.
Abstract: Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate - which keeps the models simple but precludes the discussion of distributional effects of monetary policy. We generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically. We show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, whereas asymmetric injections may increase long-run output and welfare.
109 citations