A Tractable Model of Monetary Exchange with Ex-Post Heterogeneity

Guillaume Rocheteau, Pierre-Olivier Weill and Russell Wong

No 17-6, Working Paper from Federal Reserve Bank of Richmond

Abstract: We construct a continuous-time, New-Monetarist economy with general preferences that displays an endogenous, non-degenerate distribution of money holdings. Properties of equilibria are obtained analytically and equilibria are solved in closed form in a variety of cases. We study policy as incentive-compatible transfers financed with money creation. Lump-sum transfers are welfare-enhancing when labor productivity is low, but regressive transfers achieve higher welfare when labor productivity is high. We introduce illiquid government bonds and draw implications for the existence of liquidity-trap equilibria and policy mix in terms of \"helicopter drops\" and open-market operations.

Keywords: money; inflation; risk sharing; liquidity traps (search for similar items in EconPapers)
JEL-codes: E40 E50 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2017-04-20
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Related works:
Journal Article: A tractable model of monetary exchange with ex-post heterogeneity (2018)
Working Paper: A Tractable Model of Monetary Exchange with Ex-post Heterogeneity (2015)
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