Can Indeterminacy Explain the Short-Run Non-Neutrality of Money?

46 Pages Posted: 12 Dec 2002

See all articles by Fiorella De Fiore

Fiorella De Fiore

Bank for International Settlements (BIS) - Monetary and Economic Department

Date Written: September 2000

Abstract

This paper analyzes the possibility to generate indeterminacy and equilibria with short-run non-neutrality of money in a model with flexible prices, constant returns to scale in production and constant money growth rules. The model recovers previous results in the literature as particular cases. It is shown that real effects of monetary shocks, as observed in the data, can arise in four regions of the parameter space. Two regions are characterized by unreasonable assumptions, which lead to inferiority of consumption or leisure. Two regions are characterized by reasonable assumptions and by normality of the goods. However, real effects of monetary shocks require implausible parameter values.

Keywords: Indeterminacy, Neutrality of Money, Transactions Costs

JEL Classification: E13, E40, E52

Suggested Citation

De Fiore, Fiorella, Can Indeterminacy Explain the Short-Run Non-Neutrality of Money? (September 2000). Available at SSRN: https://ssrn.com/abstract=355660 or http://dx.doi.org/10.2139/ssrn.355660

Fiorella De Fiore (Contact Author)

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

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