TY - JOUR
T1 - Money, capital, and redistributive effects of monetary policies
AU - Shi, Shouyong
N1 - Funding Information:
I am grateful to a referee for suggestions that led to significant improvements on the first draft of this paper. This paper is a part of an earlier paper circulated under the title, ‘Money and capital accumulation in an economy with spatially separated markets’. I am grateful to Merwan Engineer and workshop participants at the University of Windsor for helpful comments on this earlier paper. Financial support from the Social Sciences and Humanities Research Council of Canada is also gratefully acknowledged. All errors are mine.
PY - 1999/2/24
Y1 - 1999/2/24
N2 - This paper examines the redistributive role of expansionary monetary policies. For this purpose a physical environment with heterogeneous agents is described to emphasize two frictions. One is a within-market friction that agents cannot borrow within each market; the other is a cross-market friction that agents cannot borrow across markets. Although a contractionary monetary policy is required to eliminate the within-market friction, as in many previous monetary models, an expansionary monetary policy is required to eliminate the cross-market friction. When both frictions are operational, no monetary policy alone can restore efficiency and the second-best monetary policy requires the money growth rate to exceed the Friedman rule. The first-best allocation can be achieved by a combination of fiscal policies and the Friedman rule.
AB - This paper examines the redistributive role of expansionary monetary policies. For this purpose a physical environment with heterogeneous agents is described to emphasize two frictions. One is a within-market friction that agents cannot borrow within each market; the other is a cross-market friction that agents cannot borrow across markets. Although a contractionary monetary policy is required to eliminate the within-market friction, as in many previous monetary models, an expansionary monetary policy is required to eliminate the cross-market friction. When both frictions are operational, no monetary policy alone can restore efficiency and the second-best monetary policy requires the money growth rate to exceed the Friedman rule. The first-best allocation can be achieved by a combination of fiscal policies and the Friedman rule.
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U2 - 10.1016/s0165-1889(98)00035-9
DO - 10.1016/s0165-1889(98)00035-9
M3 - Article
AN - SCOPUS:0037582188
SN - 0165-1889
VL - 23
SP - 565
EP - 590
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
IS - 4
ER -