Modeling Money and Credit: The New Monetarist View

16 Pages Posted: 29 May 2020

See all articles by Fabrizio Mattesini

Fabrizio Mattesini

University of Rome Tor Vergata - Faculty of Economics

Date Written: September 2019

Abstract

In this paper, we survey recent theoretical work on money and credit following the New Monetarist approach. We argue that a coherent macroeconomic model should show that both these institutions are essential, in the sense that they help achieve allocations that could not be attained without them. As recent literature shows, however, this is difficult to establish and requires being very explicit about the frictions that money and credit help overcome. The paper highlights the importance of microfoundations and provides a word of caution against using reduced form models in macroeconomics.

Suggested Citation

Mattesini, Fabrizio, Modeling Money and Credit: The New Monetarist View (September 2019). The Manchester School, Vol. 87, pp. 29-44, 2019, Available at SSRN: https://ssrn.com/abstract=3613945 or http://dx.doi.org/10.1111/manc.12290

Fabrizio Mattesini (Contact Author)

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia n.2
Rome, rome 00100
Italy

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