A model in which monetary policy is about money

Alexei Deviatov and Neil Wallace

Journal of Monetary Economics, 2009, vol. 56, issue 3, pages 283-288

Abstract: Optimal monetary policy is studied in a model with (i) heterogeneity in the degree to which different people are monitored (have publicly known histories); (ii) idiosyncratic shocks that give rise to heterogeneity in earning and spending realizations; and (iii) central-bank intervention in a "market" in claims or credit in which the participants are those who are heavily monitored. A special case of the model has everyone perfectly monitored. In that case, there is no role for money and no role for central-bank intervention. In the example displayed with imperfect monitoring, optimal intervention is not simple.

Keywords: Monetary; policy; Search; Central-bank; intervention (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:moneco:v:56:y:2009:i:3:p:283-288

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