Some Benefits of Cyclical Monetary Policy

32 Pages Posted: 31 Oct 2007

See all articles by Ricardo de O. Cavalcanti

Ricardo de O. Cavalcanti

Pennsylvania State University, College of the Liberal Arts - Department of Economic

Ed Nosal

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Date Written: November 2005

Abstract

In this paper, we present a simple random-matching model in which different seasons translate into different propensities to consume and produce. We find that the cyclical creation and destruction of money is beneficial for welfare under a wide variety of circumstances. Our model of seasons can be interpreted as providing support for the creation of the Federal Reserve System, with its mandate of supplying an elastic currency for the nation.

Suggested Citation

Cavalcanti, Ricardo de O. and Nosal, Ed, Some Benefits of Cyclical Monetary Policy (November 2005). FRB of Cleveland Working Paper No. 05-11. Available at SSRN: https://ssrn.com/abstract=1025494 or http://dx.doi.org/10.2139/ssrn.1025494

Ricardo de O. Cavalcanti

Pennsylvania State University, College of the Liberal Arts - Department of Economic ( email )

524 Kern Graduate Building
University Park, PA 16802-3306
United States
814-863-7416 (Phone)
814-863-4775 (Fax)

Ed Nosal (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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