A Unified Framework for Monetary Theory and Policy Analysis, Second Version

49 Pages Posted: 28 Oct 2002 Last revised: 18 Nov 2007

See all articles by Ricardo Lagos

Ricardo Lagos

New York University (NYU) - Department of Economics

Randall Wright

University of Wisconsin - Madison - Department of Finance, Investment and Banking; Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Date Written: September 10, 2002

Abstract

Search-theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions usually have strong assumptions that make them ill-suited for discussing some policy questions, especially those concerning changes in the money supply. Hence most policy analysis uses reduced-form models. We propose a framework that attempts to bridge this gap: it is based explicitly on microeconomic frictions, but allows for interesting macroeconomic policy analyses. At the same time, the model is analytically tractable and amenable to quantitative analysis.

Suggested Citation

Lagos, Ricardo and Wright, Randall D., A Unified Framework for Monetary Theory and Policy Analysis, Second Version (September 10, 2002). PIER Working Paper No. 02-040; FRB of Cleveland Working Paper No. 02-11. Available at SSRN: https://ssrn.com/abstract=339260 or http://dx.doi.org/10.2139/ssrn.339260

Ricardo Lagos

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
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212-998-8937 (Phone)

Randall D. Wright (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-3860 (Phone)

Federal Reserve Banks - Federal Reserve Bank of Minneapolis

90 Hennepin Avenue
Minneapolis, MN 55480
United States

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