Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88729
Authors: 
Camera, Gabriele
Chien, YiLi
Year of Publication: 
2013
Series/Report no.: 
SAFE Working Paper Series 33
Abstract: 
We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money - reduced-form vs. explicit role - neither induces theoretical nor quantitative differences in results. Given conformity of preferences, technologies and shocks, both models reduce to one difference equation. The equations do not coincide only if price distortions are differentially imposed across models. To illustrate, when cash prices are equally distorted in both models equally large welfare costs of inflation are obtained in each model. Our insight is that if results differ, then this is due to differential assumptions about the pricing mechanism that governs cash transactions, not the explicit microfoundation of money.
Subjects: 
cash-in-advance
matching
microfoundations
money
inflation
JEL: 
E1
E4
E5
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
361.78 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.