Reallocation of production inputs in a monetary economy

Yoshitaka Tanaka

Economics Letters, 2019, vol. 183, issue C, -

Abstract: This paper explains the return correlation between money and competing assets, the coexistence puzzle, and the effect of inflation on output. As the model allows sellers to use lands as an input, buyers’ portfolios can rebalance from money to land in response to inflation expanding sellers’ production, which explains the positive correlation between output and inflation and the negative correlation between the return on money and land. Although the return on money is dominated by land, both assets are used in equilibrium.

Keywords: Money; Monetary policy; Search; Liquidity (search for similar items in EconPapers)
JEL-codes: E31 E41 E44 E51 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:183:y:2019:i:c:27

DOI: 10.1016/j.econlet.2019.108563

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