The Distribution of Money Balances and the Nonneutrality of Money

23 Pages Posted: 5 May 2005

See all articles by Aleksander Berentsen

Aleksander Berentsen

University of Basel - Economics Department; CESifo (Center for Economic Studies and Ifo Institute)

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Christopher J. Waller

Federal Reserve Banks - Federal Reserve Bank of St. Louis; University of Notre Dame - Department of Economics

Abstract

Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate - which keeps the models simple but precludes the discussion of distributional effects of monetary policy. We generalize these models by assuming two rounds of trade before agents can readjust their money holdings to study a range of new distributional effects analytically. We show that unexpected, symmetric lump-sum money injections may increase short-run output and welfare, whereas asymmetric injections may increase long-run output and welfare.

Suggested Citation

Berentsen, Aleksander and Camera, Gabriele and Waller, Christopher J., The Distribution of Money Balances and the Nonneutrality of Money. International Economic Review, Vol. 46, No. 2, pp. 465-487, May 2005. Available at SSRN: https://ssrn.com/abstract=714271

Aleksander Berentsen

University of Basel - Economics Department ( email )

Petersgraben 51
Basel, CH-4003
Switzerland

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Gabriele Camera

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Christopher J. Waller (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

University of Notre Dame - Department of Economics ( email )

434 Flanner Hall
Notre Dame, IN 46556
United States
574-631-4963 (Phone)
574-631-9238 (Fax)

HOME PAGE: http://www.nd.edu/~cwaller/

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