Money as a coordination device

Quentin Wibaut ()

No 1997023, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper examplifies in a simple general equilibrium model the important role played by the monetary policy when there are strategic interactions bearing on nominal variables. It shows that the common notion of money neutrality is misleading in this context. Indeed, linear homogeneity in the money stock for all nominal variables does not imply that the money supply cannot affect real variables. Though in this case the money stock is neutral, the monetary rule (according to which money is supplied) alters strategic interactions. As a result, money can be used to resolve (weak) coordination failures.

Keywords: Monetary Policy; Imperfect Competition (search for similar items in EconPapers)
JEL-codes: E0 E5 (search for similar items in EconPapers)
Pages: 14
Date: 1997-01-01
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1997023

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