Money, Search, and Business Cycles

25 Pages Posted: 30 Aug 2011

See all articles by S. Borağan Aruoba

S. Borağan Aruoba

University of Maryland - Department of Economics

Date Written: August 2011


Monetary models that specify explicit frictions to generate money demand have been developed over the last 20 years and have been used to address many questions. In this article, I investigate the short‐run properties of a particular model considering a number of versions based on some modeling choices. All versions feature flexible prices. I find that in many aspects, both real and nominal, the model resembles other, more reduced‐form models. Some variations of the model come closer to matching some key nominal facts than a reduced‐form model. The model also generates counter cyclical markups, in line with the data.

Suggested Citation

Aruoba, S. Boragan, Money, Search, and Business Cycles (August 2011). International Economic Review, Vol. 52, Issue 3, pp. 935-959, 2011, Available at SSRN: or

S. Boragan Aruoba (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3508 (Phone)
301-405-3542 (Fax)

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