Money and Interest in a Cash-in-Advance Economy / Robert E. Lucas, Jr., Nancy L. Stokey.

Format:

Book

Author/Creator:

Lucas, Robert E, Jr.

Contributor:

National Bureau of Economic Research.

Stokey, Nancy L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1618.

NBER working paper series no. w1618

Language:

English

Subjects (All):

Foreign exchange.

Business cycles.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Cambridge, Massachusetts : National Bureau of Economic Research, 1985.

Summary:

In this paper we analyze an aggregative general equilibrimi model in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. We develop methods for verifying the existence of, characterizing, and explicitly calculating equilibria. A main result of the analysis is that current money growth affects the current real allocation only insofar as it affects expectations about future money growth, i.e., only through its value as a signal.

Notes:

Print version record

May 1985.