A model in which monetary policy is about money

Alexei Deviatov, Neil Wallace

Research output: Contribution to journalArticlepeer-review

9 Scopus citations


Optimal monetary policy is studied in a model with (i) heterogeneity in the degree to which different people are monitored (have publicly known histories); (ii) idiosyncratic shocks that give rise to heterogeneity in earning and spending realizations; and (iii) central-bank intervention in a "market" in claims or credit in which the participants are those who are heavily monitored. A special case of the model has everyone perfectly monitored. In that case, there is no role for money and no role for central-bank intervention. In the example displayed with imperfect monitoring, optimal intervention is not simple.

Original languageEnglish (US)
Pages (from-to)283-288
Number of pages6
JournalJournal of Monetary Economics
Issue number3
StatePublished - Apr 2009

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance


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