A search theory of money and commerce with Neoclassical production

Miquel Faig

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper advances a highly tractable model with search theoretic foundations for money and neoclassical growth. In the model, manufacturing and commerce are distinct and separate activities. In manufacturing, goods are efficiently produced combining capital and labor. In commerce, goods are exchanged in bilateral meetings. The model is applied to study the effects of inßation on capital accumulation and welfare. With realistic parameters, inflation has large negative effects on welfare even though it raises capital and output. In contrast, with cash-in-advance, a device informally motivated with bilateral trading, inflation depresses capital and output and has a negligible effect on welfare.

Keywords: Search; money; commerce; inflation; neoclassical production; capital accumulation; optimum quantity of money (search for similar items in EconPapers)
JEL-codes: E13 E40 E52 (search for similar items in EconPapers)
Date: 2001-09
New Economics Papers: this item is included in nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Working Paper: A Search Theory of Money and Commerce with Neoclassical Production (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:567

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