Skip to main content Skip to main content
SHARE   Share on Twitter Share on Facebook Share on LinkedIn Email

Money and Capital: A Quantitative Analysis

We study the effects of money (anticipated inflation) on capital formation. Previous papers on this 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 the frictions that make money essential. This introduces several new elements, including a two-sector structure with centralized and decentralized markets, stochastic trading opportunities, and bargaining. We show how these elements matter qualitatively and quantitatively. Our numerical results differ from findings in the reduced-form literature. The analysis also reduces the gap between monetary theory and mainstream macro.

Read Full Text

Subscribe to our newsletter

Follow us

Twitter logo Google Plus logo Facebook logo YouTube logo LinkedIn logo
Back to Top