I construct a unified macroeconomic framework by incorporating frictional markets in a neoclassical environment. This framework is analytically tractable despite search frictions, income risks and endogenous money distributions. I use this framework to formalize a theory that the variety and the...

Economic output may drop for reasons related with supply, such as a fall in the number of the employed factors of production or increases in real costs; and for reasons related with demand, such as an increase in non-productive market power or a fall in aggregate demand, the worst type of...

The standard view of the monetary transmission mechanism rests on the central bank's ability to manipulate the overnight interest rate by controlling reserve supply. In the 1990s, there was a significant decline in level of reserve balances in the U.S. accompanied at first by an increase in the...

The paper examines the experiences of countries in defining monetary aggregates, particularly those countries that have undertaken substantial redefinitions. It finds that both the functional and empirical approaches are important; and that monetary definitions tend to be dynamic in nature,...

In this paper, we focus on the Lagos and Wright (2005) monetary search model - a workhorse in the so-called New Monetarist Economics. After describing this micro-founded yet tractable framework, we review recent developments in extending it to study a variety of issues from monetary theory to...

This paper considers whether eliminating the stock of government debt outstanding would reduce welfare. It models an economy with three assets - currency, government bonds, and storage, a transactions role for money, and a demand for liquidity and thus a role for banks. The Friedman rule is not...

The banks are central elements of a market economy. In more than one way, they facilitate business transactions by acting as depositor and lender for many actors in the domestic and international economy. The banking industry in Nigeria has expanded in size in terms of assets in the last 60...

In the paper we show the macroeconomic effects of a monetary policy shock using both recursive and non-recursive SVAR decomposition. We find that the responsiveness of the CPI index and output in Poland is smaller and slower than in the euro zone. Using panel data we check how bank-specific...

Emerging economies experience sudden stops in capital inflows. As we have argued in Caballero and Krishnamurthy (2002), having access to monetary policy during these sudden stops is useful, but mostly for quot;insurancequot; rather than for aggregate demand reasons. In this environment, a...

Emerging economies are exposed to severe and sudden shortages of international financial resources. Yet domestic agents seem not to undertake enough precautions against these sudden stops. Following our previous work, we highlight in this paper the central role played by limited domestic...