We study the effects of money (anticipated inflation) on capital formation. Previous papers on this topic adopt reduced-form approaches, putting money in the utility function or imposing cash in advance, but use otherwise frictionless models. We follow a literature that is more explicit about...

Under the identification strategy that only innovations to productivity can have a permanent impact on labor productivity, Gali (1999) finds that the contribution of productivity shocks to aggregate fluctuations is negligible. More recently, Fisher (2006) extends Galis's identification to allow...