Nonneutrality of Money in Dispersion: Hume Revisited

Jin, Gu and Zhu, Tao (2017): Nonneutrality of Money in Dispersion: Hume Revisited.

Abstract

For a class of standard and widely-used preferences, a one-shot money injection in a standard matching model can induce a significant and persistent output response by dispersing the distribution of wealth. Decentralized trade matters for both persistence and significance. In the presence of government bonds the injection has a liquidity effect and the inflation rate right following the injection may be below the steady-state rate level.

• Item Type: MPRA Paper
• Language: English
• Keywords: Nonneutrality, Money Injection, Phillips Curve, Nominal Rigidity
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E40 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General

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