Optimal Monetary and Fiscal Policies in a Search-Theoretic Model of Money and Unemployment

Pedro Gomis-Porqueras, Benoit Julien and Chengsi Wang ()
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Chengsi Wang: School of Economics, University of New South Wales

No 2010-23, Discussion Papers from School of Economics, The University of New South Wales

Abstract: In this paper we study the optimal monetary and fiscal policies of a general equilibrium model of unemployment and money with search frictions both in labor and goods markets as in Berentsen, Menzio and Wright (2010). We abstract from revenue-raising motives to focus on the welfare-enhancing properties of optimal policies. We show that some of the inefficiencies in the Berentsen, Menzio and Wright (2010) framework can be restored with appropriate fiscal policies. In particular, when lump sum monetary transfers are possible, a production subsidy financed by money printing can increase output in the decentralized market and a vacancy subsidy financed by a dividend tax even when the Hosios’ rule does not hold.

Keywords: Search and matching; Fiscal polices; Money; Unemployment; Efficiency (search for similar items in EconPapers)
JEL-codes: E52 E63 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: OPTIMAL MONETARY AND FISCAL POLICIES IN A SEARCH-THEORETIC MODEL OF MONEY AND UNEMPLOYMENT (2013)
Working Paper: Optimal Monetary and Fiscal Policies In a Search-theoretic Model of Money and Unemployment (2010)
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