Liquidity: A New Monetarist Perspective

Lagos, Ricardo; Rocheteau, Guillaume; Wright, Randall

doi:10.1257/jel.20141195

Cited by 201 publications

(111 citation statements)

References 441 publications

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“…Following Lagos et al. (), we interpret

γ_{t} false(m^{b}, m^{s} false) = \frac{\sum_{d} μ_{t} false(d; m^{b}, m^{s} false) β false[v_{t + 1} (m^{s} + d) - v_{t + 1} (m^{s}) false]}{c false(y_{t} (m^{b}, m^{s}) / A false)}

as the expected markup in the meeting . We define aggregate output at t as

Y_{t} = 0.5 \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) y_{t} false(m^{b}, m^{s} false),

the average price at t as

P_{t} = \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) p_{t} false(m^{b}, m^{s} false),

and the average markup at t as

{normalΓ}_{t} = \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) γ_{t} false(m^{b}, m^{s} false) .

With the time indices dropped, statistics in – represent their steady‐state counterparts; if

M^{'} \neq M

and x is a statistic at

…”

Section: The Basic Modelmentioning

confidence: 99%

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Nonneutrality of Money in Dispersion: Hume Revisited

Jin

Zhu

2019

Int Economic Review

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For a class of standard and widely used preferences, a one‐shot money injection in a standard matching model can induce a significant and persistent output response by dispersing the distribution of wealth. Decentralized trade matters for both persistence and significance. Following the injection, the price response may be sluggish, the markup may move up with output, and both the interest rate and the inflation rate may drop below their trend levels.

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“…Following Lagos et al. (), we interpret

γ_{t} false(m^{b}, m^{s} false) = \frac{\sum_{d} μ_{t} false(d; m^{b}, m^{s} false) β false[v_{t + 1} (m^{s} + d) - v_{t + 1} (m^{s}) false]}{c false(y_{t} (m^{b}, m^{s}) / A false)}

as the expected markup in the meeting . We define aggregate output at t as

Y_{t} = 0.5 \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) y_{t} false(m^{b}, m^{s} false),

the average price at t as

P_{t} = \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) p_{t} false(m^{b}, m^{s} false),

and the average markup at t as

{normalΓ}_{t} = \sum_{m^{b}, m^{s}} π_{t} false(m^{b} false) π_{t} false(m^{s} false) γ_{t} false(m^{b}, m^{s} false) .

With the time indices dropped, statistics in – represent their steady‐state counterparts; if

M^{'} \neq M

and x is a statistic at

…”

Section: The Basic Modelmentioning

confidence: 99%

“…We consider two reference values for the buyer's surplus share θ, 1 and the markup‐determined share

θ^{Γ}

; the latter value, as proposed by Lagos et al. (), is chosen to match empirical evidences on markups. In our study, we target 1.39 as the average markup value in

(v, π)

given other parameters…”

Section: The Basic Modelmentioning

confidence: 99%

Nonneutrality of Money in Dispersion: Hume Revisited

Jin

Zhu

2019

Int Economic Review

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“…Furthermore, financial intermediation of money (borrowing and saving) is essential, because it improves the allocation (Berentsen et al, 2007). An extensive and up-to-date discussion of this literature can be found in Williamson and Wright (2010), Nosal and Rocheteau (2011) and Lagos et al (2017). Our article is related to the many papers in that literature that study money demand and the welfare cost of inflation (Faig and Jerez, 2007;Craig and Rocheteau, 2008a,b;Head et al, 2012;Liu et al, 2015;Wang, 2015).…”

Section: Literature Reviewmentioning

confidence: 98%

Limited Commitment and the Demand for Money

Berentsen

Huber

Marchesiani

2017

The Economic Journal

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Understanding money demand is important for our comprehension of macroeconomics and monetary policy. Its instability has made this a challenge. Common explications for the instability are financial regulations and financial innovations that shift the money demand function. We provide a complementary view by showing that a model where borrowers have limited commitment can significantly improve the fit between the theoretical money demand function and the data. Limited commitment can also explain why the ratio of credit to M1 is currently so low, despite that nominal interest rates are at their lowest recorded levels.

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“…In search‐and‐bargaining models, Lagos et al. () survey work that gets costs closer to 5.0%. Our findings are smaller, for reasons explained below.…”

Section: Literaturementioning

confidence: 99%

Sticky Prices and Costly Credit

Wang

Wright

Liu

2020

Int Economic Review

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We develop a theory of money and credit as competing payment instruments, then put it to work in applications. Agents use cash and credit because the former (latter) is subject to the inflation tax (transaction costs). Frictions that make the choice of payment method interesting also imply equilibrium price dispersion. We derive closed‐form solutions for money demand, and show how to simultaneously account for the price‐change facts, cash–credit shares in micro data, and money‐interest correlations in macro data. The effects of inflation on welfare, price dispersion and markups are discussed, as are nonstationary equilibria with dynamics in the price distribution.

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Liquidity: A New Monetarist Perspective

Cited by 201 publications

References 441 publications

Nonneutrality of Money in Dispersion: Hume Revisited

Nonneutrality of Money in Dispersion: Hume Revisited

Limited Commitment and the Demand for Money

Sticky Prices and Costly Credit

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