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A Unified Framework for Monetary Theory and Policy Analysis
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TL;DR: This article proposed a framework based on explicit micro foundations within which macro policy can be analyzed and demonstrated that the model is both analytically tractable and amenable to quantitative analysis by using it to estimate the welfare cost of inflation.
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Abstract: Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions of these models typically need strong assumptions that make them ill-suited for studying monetary policy. We propose a framework based on explicit micro foundations within which macro policy can be analyzed. The model is both analytically tractable and amenable to quantitative analysis. We demonstrate this by using it to estimate the welfare cost of inflation. We find much higher costs than the previous literature: our model predicts that going from 10% to 0% inflation can be worth between 3% and 5% of consumption.
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Citations
Financial Development and Aggregate Saving Rates: A Hump-Shaped Relationship
Pengfei Wang,Lifang Xu,Zhiwei Xu +2 more
TL;DR: In this article, a hump-shaped empirical relationship between financial development and the national saving rate across 12 East Asian and 31 OECD economies has been documented, and an incomplete market model featuring both heterogeneous households and heterogeneous firms is provided to explain this humpshaped relationship, which suggests that financial development tends to reduce the precautionary-saving incentives of households but increase firms' ability to borrow and invest.
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Money and Capital: A Quantitative Analysis
S. Boragan Aruoba,Christopher J. Waller,Randall Wright +2 more
- 01 Aug 2009
TL;DR: The analysis of the effects of money on capital formation in a model with more explicit frictions introduces new elements and generates different results than previous studies.
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Competing Currencies in the Laboratory
Janet Hua Jiang,Cathy Zhang +1 more
TL;DR: A laboratory experiment is designed based on a simple two-country, two-currency search model to study factors that affect circulation patterns and equilibrium selection and investigates competition between two intrinsically worthless currencies.
Floor Systems for Implementing Monetary Policy: Some Unpleasant Fiscal Arithmetic
TL;DR: In this paper, the authors construct a general equilibrium model to study the properties of a floor and a channel system, and show that a floor system is weakly optimal if and only if the target rate satisfies the Friedman rule.
Empirical Evidence on Inflation and Unemployment in the Long Run
Alfred A. Haug,Ian King +1 more
TL;DR: This article examined the relationship between inflation and unemployment in the long run, using quarterly US data from 1952 to 2010, and found strong evidence that a positive relationship exists, where inflation leads unemployment by some 3 to 3 1/2 years, in cycles that last from 8 to 25 or 50 years.
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On The Efficiency of Matching and Related Models of Search and Unemployment
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