An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment

57 Pages Posted: 5 Nov 2018

See all articles by Guillaume Rocheteau

Guillaume Rocheteau

University of California, Irvine; Federal Reserve Banks - Federal Reserve Bank of Cleveland

Pierre-Olivier Weill

University of California, Los Angeles; National Bureau of Economic Research (NBER)

Tsz-Nga Wong

Washington University in St Louis

Date Written: November 2018

Abstract

We develop a New Monetarist model with expenditure and unemployment risks that generates equilibria with non-degenerate distribution of money holdings. Distributional effects can overturn key insights of the model with degenerate distributions, e.g., the value of money depends on the income distribution; a one-time money injection raises aggregate real balances in the short run –price adjustments look sluggish; anticipated inflation can raise output and welfare; there can be a long-run trade-o¤ between inflation and unemployment. Distributional effects also generate a quantitatively significant aggregate demand channel through which transfers financed with money creation can raise employment, and productivity shocks are amplified.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Rocheteau, Guillaume and Weill, Pierre-Olivier and Wong, Tsz-Nga, An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment (November 2018). NBER Working Paper No. w25220. Available at SSRN: https://ssrn.com/abstract=3278520

Guillaume Rocheteau (Contact Author)

University of California, Irvine ( email )

Campus Drive
Irvine, CA 62697-3125
United States

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

East 6th & Superior
Cleveland, OH 44101-1387
United States

Pierre-Olivier Weill

University of California, Los Angeles ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Tsz-Nga Wong

Washington University in St Louis ( email )

One Brookings Drive
St. Louis, MO 63130
United States

HOME PAGE: http://sites.google.com/site/tszngawong/

Register to save articles to
your library

Register

Paper statistics

Downloads
4
Abstract Views
49
PlumX Metrics