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| Title: | | General equilibrium with monopolistic firms and occasionally binding cash-in-advance constraints  |
| Authors: | | Dixon, Huw Pourpourides, Panayiotis M. |
| Issue Date: | | 2010 |
| Series/Report no.: | | Cardiff Economics Working Papers E2010/6 |
| Abstract: | | We show a simple way to introduce monopolistic competition in a general equilibrium model where prices are fully .exible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind.We establish the conditions under which money has real effects and demonstrate that an equilibrium that occurs at a binding CIA constraint is welfare inferior to any equilibrium that occurs at a nonbinding CIA constraint with the same level of technology. We argue that even though the probability of a binding CIA constraint can be increasing with money supply, under certain conditions, expansionary money supply is welfare improving. |
| Subjects: | | cash-in-advance general equilibrium monopolistic competition |
| JEL: | | D43 E31 E41 E51 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Cardiff Economics Working Papers
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