Pedro, Gomis-Porqueras and Benoit, Julien and Chengsi, Wang (2010): Optimal Monetary and Fiscal Policies In a Search-theoretic Model of Money and Unemployment.
Download (214kB) | Preview
In this paper we study the optimal monetary and ﬁscal policies of a general equilibrium model of unemployment and money with search frictions both in labor and goods markets as in Berentsen, Menzio and Wright (2010). We abstract from revenue-raising motives to focus on the welfare-enhancing properties of optimal policies. We show that some of the inefﬁciencies in the Berentsen, Menzio and Wright (2010) framework can be restored with appropriate ﬁscal policies. In particular, when lump sum monetary transfers are possible, a production subsidy ﬁnanced by money printing can increase output in the decentralized market and a vacancy subsidy ﬁnanced by a dividend tax even when the Hosios’ rule does not hold.
|Item Type:||MPRA Paper|
|Original Title:||Optimal Monetary and Fiscal Policies In a Search-theoretic Model of Money and Unemployment|
|Keywords:||Search and matching, Fiscal polices,Money, Unemployment, Efﬁciency|
|Subjects:||E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
|Depositing User:||Chengsi Wang|
|Date Deposited:||31. Oct 2010 17:04|
|Last Modified:||15. Feb 2013 22:48|
 Berentsen, A., G. Rocheteau and S. Shi (2007): "Friedman Meets Hosios: Efﬁciency in Search Models of Money", Economic Journal, 117 (January), 174-195.
 Berentsen, A., G. Menzio and R. Wright (2010): "Inﬂation and Unemployment in the Long Run", American Economic Review, Forthcoming.
 Christiano, L. and M. Eichenbaum (1995): "Liquidity effects, monetary policy, and the business cycle", Journal ofMoney credit and Banking, 27(4):1113-1136.
 Cooley, T. F. and V. Quadrini (1999): "A Neoclassical Model of the Phillips Curve Relation", Journal ofMonetary Economics, 44(2):165-193.
 Cooley and Quadrini (2004): "Optimal Monetary Policy in a Phillips-curve World," Journal of Economic Theory, 118(2):174-20.
 Feinman, J. (1993): "Reserve Requirements: History, Current Practice and Potential Reform", Federal Reserve Bulletin, 79: 569-89.
 Gomis-Porqueras, P. and A.Peralta-Alva (2010): "Optimal monetary and ﬁscal policies in a search theoretic model of monetary exchange", European Economic Review, 54(3):331- 344.
 Hosios,A.J. (1990): "On the Efﬁciency of Matching and Related Models of Search Unemployment," Review of Economic Studies, 57(2): 279-298.
 Lehmann, E. (2006): "A Search Model of Unemployment and Inﬂation", IZA Discussion Paper No. 2194.
 D.Mortensen and C. Pissarides (1994): "Job Creation and Job Destruction in the Theory of Unemployment", Review of Economic Studies, 61(3):397-415.
 Shi, S. (1998): "Search for a Monetary Propagation Mechanism," Journal of Economic Theory, 81(2):314–352.
 Walsh, C. (2003): "Labor Market Search and Monetary Shocks," Elements of Dynamic Macroeconomic Analysis, S. Altug, J. Chadha, and C. Nolan, editors, Cambridge University Press.