Specialization, Transactions Technologies, and Money Growth

Harold Cole and Alan Stockman

No 2724, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: With some models of money and a representative-agent there is no reason for monetary trade because identical individuals can consume their own production. Lucas proposed a parable involving differentiated products in a cash-in-advance model to avoid this problem. This paper studies Lucas?s suggestion by developing a differentiated product model with money, a cash-in-advance constraint for market purchases, and endogenous specialization. Individuals who are identical ex ante choose to differ ex post in equilibrium. Monetary exchange involves differentiated goods at a point in time, so a nonzero balance of trade is not a prerequisite for a monetary equilibrium. In contrast to results in some other models, we find that consumption of goods that are not purchased with money (analogous to leisure services or credit goods) can either rise or fall with a rise in the money growth rate. Finally, we allow for costly barter and examine individuals' choices of the method of payment. We discuss the implied nominal-interest elasticities of the (real) demand for money in the general equilibrium.

Date: 1988-09
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as International Economic Review, 33 no. 2, May 1992, 283-298

Downloads: (external link)
http://www.nber.org/papers/w2724.pdf (application/pdf)

Related works:
Journal Article: Specialization, Transactions Technologies, and Money Growth (1992)
Working Paper: SPECIALIZATION, TRANSACTIONS TECHNOLOGIES, AND MONEY GROWTH (1988)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:2724

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2724

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by (wpc@nber.org).