New Monetarism in Continuous Time: Methods and Applications

Abstract

We develop a New Monetarist model in continuous time where agents trade continuously in competitive markets and infrequently in pairwise meetings. Agents can produce and consume both in flows over time intervals and in discrete quantities at points in time. We detail the methodology to solve individual optimisation problems and characterise the full set of perfect foresight equilibria. We illustrate the role of continuous time and the tractability of our approach with three applications related to monetary policy: (i) forward guidance with policy announcements; (ii) aggregate demand management and firm entry; (iii) open market operations with partially liquid assets.

Analysis of the application of neoliberalism and monetarism in the modern economic system

“…Монетаристы считают, что снижение налогов уменьшит учетную ставку и безработицу, увеличат доходы и заработную плату, тем самым увеличат накопления и инвестиции населения. По их мнению, уменьшение налогов приведет к увеличению сбережений у богатых людей, благодаря чему увеличится инвестирование, что в свою очередь будет стимулировать экономический рост и количество налоговых поступлений в бюджет государства [12].…”

Liquidity and the International Allocation of Economic Activity

“…Notice that the solution for from () does not depend on , so that after a match is dissolved, the amount of assets that the financier holds jumps immediately to its desired level. As discussed by Choi and Rocheteau (2020), who provide a more formal treatment of monetarist models in continuous time with jumps in the state variable, this property of the model is a consequence of the technology available to financiers to produce and consume the numéraire good both in flows and in discrete quantities at some countable instants of time.…”