A Search Theory of Money and Commerce with Neoclassical Production

Miquel Faig

Working Papers from University of Toronto, Department of Economics

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 in ation on capital accumulation and welfare. With realistic parameters, in ation 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, in ation depresses capital and output and has a negligible effecton welfare. (Keywords: search, money, commerce, in ation, neoclassical production, capital accumulation, optimum quantity of money.)

Keywords: search, money, commerce, in; ation, 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)
Pages: 42 pages
Date: 2001-07-24
New Economics Papers: this item is included in nep-dge and nep-mon
References: Add references at CitEc
Citations: View citations in EconPapers (10)

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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:tor:tecipa:faig-01-01

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