The Distribution of Money Balances and the Non-Neutrality of Money

Aleksander Berentsen, Gabriele Camera and Christopher Waller

No 220, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate which keeps the models simple but precludes discussion of distributional effects of monetary policy. We generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically. We show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, while asymmetric injections may increase long-run output and welfare.

Keywords: distribution; no-neutrality; money balance (search for similar items in EconPapers)
JEL-codes: A12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: THE DISTRIBUTION OF MONEY BALANCES AND THE NONNEUTRALITY OF MONEY (2005)
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