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An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment

Guillaume Rocheteau (), Pierre-Olivier Weill () and Tsz-Nga Wong ()

No 25220, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a New Monetarist model with expenditure and unemployment risks that generates equilibria with non-degenerate distribution of money holdings. Distributional effects can overturn key insights of the model with degenerate distributions, e.g., the value of money depends on the income distribution; a one-time money injection raises aggregate real balances in the short run price adjustments look sluggish; anticipated inflation can raise output and welfare; there can be a long-run trade-o¤ between inflation and unemployment. Distributional effects also generate a quantitatively significant aggregate demand channel through which transfers financed with money creation can raise employment, and productivity shocks are amplified.

JEL-codes: E40 E50 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
Note: EFG ME
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Published as Guillaume Rocheteau & Pierre-Olivier Weill & Tsz-Nga Wong, 2019. "An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment," Journal of Monetary Economics, .

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