Money Cycles

Andrew Clausen and Carlo Strub ()

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: Operating overheads are widespread and lead to concentrated bursts of activity. To transfer resources between active and idle spells, agents demand financial assets. Futures contracts and lotteries are unsuitable, as they have substantial overheads of their own. We show that money - under efficient monetary policy - is a liquid asset that leads to efficient allocations. Under all other policies, agents follow inefficient "money cycle" patterns of saving, activity, and inactivity. Agents spend their money too quickly - a "hot potato effect of inflation". We show that inflation can stimulate inefficiently high aggregate output.

Pages: 27
Date: 2014-09
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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http://www.econ.ed.ac.uk/papers/id249_esedps.pdf

Related works:
Journal Article: MONEY CYCLES (2016)
Working Paper: Money Cycles (2014)
Working Paper: Money Cycles (2011)
Working Paper: Money cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:249

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