Whither Monetary Economics?
I argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential. The argument has two parts. First, I argue that models in which real balances are assumed to be productive--models with money in utility or production functions or with cash-in-advance constraints--contain hidden inconsistencies. Second, I argue that the approach advocated is capable of providing new insights about some of the main issues in monetary economics: the effects of monetary shocks, the welfare cost of inflation, and the roles of inside and outside money. Copyright 2001 by American Economic Association.
Year of publication: |
2001
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Authors: | Wallace, Neil |
Published in: |
International Economic Review. - Department of Economics. - Vol. 42.2001, 4, p. 847-69
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Publisher: |
Department of Economics |
Saved in:
Saved in favorites
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