We study the transmission of monetary policy in credit economies where money serves as a medium of exchange. We find that—in contrast to current conventional wisdom in policy-oriented research in monetary economics—the role of money in transactions can be a powerful conduit to asset prices and ultimately, aggregate consumption, investment, output, and welfare. Theoretically, we show that the ca...

This paper proposes a model that explains the nonneutrality of money from two welldocumented psychological assumptions. The model incorporates into the general-equilibrium monopolistic-competition framework of Blanchard and Kiyotaki [1987] the psychological assumptions that (1) consumers dislike paying a price that exceeds some “fair” markup on firms’ marginal costs, and (2) consumers do not kn...

The paper offers a new formulation of the old hypothesis that money exists due to shortage of other financial assets. The theory admits various monetary regimes, ranging from a strict gold standard to interest-bearing fiat money in the form of nominal government bonds. A central assumption is that claims on currently non-existing real assets, which will be productive in the future, are not trad...

This paper, first, estimates the appropriate, log-log or semi-log, linear long-run money demand relationship capturing the behavior US money demand over the period of 1980:Q1 to 2010:Q4, using the standard linear cointegration procedures found in the literature, and the corresponding nonparametric version of the same based on Projection Pursuit Regression (PPR) methods. We then, compare the res...

Recently there has been renewed interest in coordination problems, and, in particular, in monetary aspects of coordination. This paper attempts to combine important insights developed in the literature on matching models of money (in particular Kiyotaki and Wright [1989], Kocherlakota [1998] and Cavalcanti and Wallace [1999]) with insights from the macroeconomic coordination game-technological ...

In modern economies, most money takes the form of inside money; deposits created by commercial banks to fund credit extension. Because is used as a payment instrument, doubts about risks associated with extension can affect aggregate outcomes. This paper constructs and analyzes model risky extension, creation, monetary exchange. When sufficiently risky, positive probability bank default arises ...

ship exists between the quantity of money and the general level of prices. Confidence This paper introduces a mechanism for in this relationship, expressed in terms of generating a series of rules that characterize long-run rates of money growth and inflation, the money-price relationship, defined as the along with an accumulation of evidence suprelationship between the rate of growth of portin...

inflation has always been an economic problem and different solutions have been proposed to control it. although it is said that “higher output lowers inflation rate” but it is true when other factors are constant. this study searches the answer to the following question: “what is the effect of inflation rate and output in a case that inflation rate and output growth has a volatility trend?” to...

Abstract We propose a bootstrap test for unconditional and conditional Granger-causality spectra in the frequency domain. Our aims to detect if causality at particular is systematically different from zero. In particular, we consider stochastic process derived applying independently stationary original series. At each frequency, sample against distribution of median across frequencies estimated...