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A Unified Framework for Monetary Theory and Policy Analysis
898
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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Private payment systems, collateral, and interest rates
TL;DR: The authors examines competition between public payments arrangements and private intermediaries, and the effect on central banks role in monetary policy, showing that the presence of private systems serves as a check on the ability of a monetary authority to tighten monetary policy.
Robert E. Lucas Jr.'s Collected Papers on Monetary Theory
TL;DR: A critical review of and a reader's guide to a collection of papers by Robert E. Lucas, Jr. about fruitful ways of using general equilibrium theories to understand measured economic aggregates can be found in this article.
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A monetary model of bilateral over-the-counter markets
Ricardo Lagos,Shengxing Zhang +1 more
TL;DR: This article developed a model of monetary exchange in bilateral over-the-counter markets to study the effects of monetary policy on asset prices and financial liquidity, and provided theoretical implications and empirical evidence regarding the effect of monetary policies on the liquidity of these markets.
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•Posted Content
Liquidity and the Market for Ideas
Rafael Silveira,Randall Wright +1 more
- 01 Jan 2006
TL;DR: In this paper, the authors study markets where innovators can sell ideas to entrepreneurs, who may be better at implementing them, and determine which ideas get traded in equilibrium, compare this to the efficient outcome, and discuss policy implications.
Optimal Time-Consistent Monetary, Fiscal and Debt Maturity Policy
TL;DR: This paper developed a New Keynesian model with government bonds of mixed maturity and solved for optimal time-consistent policy using global solution techniques, revealing several non-linearities absent from LQ analyses with one-period debt.
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References
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Recursive methods in economic dynamics
Nancy L. Stokey,Robert E. Lucas,Edward C. Prescott +2 more
- 01 Jan 1989
TL;DR: In this article, a deterministic model of optimal growth is proposed, and a stochastic model is proposed for optimal growth with linear utility and linear systems and linear approximations.
3.4K
Indivisible labor and the business cycle
TL;DR: In this paper, a growth model with shocks to technology is studied, and it is shown that, unlike previous equilibrium models of the business cycle, this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity.
2.6K
Optimal fiscal and monetary policy in an economy without capital
Robert E. Lucas,Nancy L. Stokey +1 more
TL;DR: In this paper, the structure and time-consistency of optimal fiscal and monetary policy in an economy without capital are investigated. And the main finding is that with debt commitments of sufficiently rich maturity structure, an optimal policy, if one exists, is time-Consistent.
2.2K
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Monetary Theory and Policy
Carl E. Walsh
- 27 Oct 1998
TL;DR: In this article, empirical evidence on money and output is presented, including the Tobin effect and the MIU approximation problems, and a general equilibrium framework for monetary analysis is presented.
2.1K
On The Efficiency of Matching and Related Models of Search and Unemployment
TL;DR: In this article, a simple framework for evaluating the allocative performance of economies characterized by trading frictions and unemployment is described, which integrates the normative results of earlier diamond-Mortensen-Pissarides bilateral matching-bargaining models of trade coordination and price-setting.
1.9K