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Comment on Long and Plosser meet Bewley and Lucas

Aubhik Khan ()

Journal of Monetary Economics, 2019, vol. 102, issue C, 93-95

Abstract: Feng Dong and Yi Wen introduce money into the Long and Plosser multi-sector real business cycle model. Money exists as a liquid asset that allows households to respond to idiosyncratic preference shocks. Despite the resulting heterogeneity in consumption, a constant marginal utility of leisure implies that households eliminated differences in their wealth each period. I argue that this framework implies excessive consumption volatility at the household level.

Keywords: Money and business cycles; Multi-sector models; Incomplete markets (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jmoneco.2019.02.001

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