A Unified Framework for Monetary Theory and Policy Analysis

@article{Lagos2005AUF,
  title={A Unified Framework for Monetary Theory and Policy Analysis},
  author={Ricardo Lagos and Randall Wright},
  journal={Journal of Political Economy},
  year={2005},
  volume={113},
  pages={463 - 484}
}
Search‐theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential. However, tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis. We propose a new framework, based on explicit micro foundations, within which macro policy can be studied. The framework is analytically tractable and easily quantifiable. We calibrate the model to standard observations and use it to… Expand
View on U Chicago Press
researchdatabase.minneapolisfed.org
891 Citations
Highly Influential Citations
185
Background Citations
398
Methods Citations
214
Results Citations
40

Supplemental Presentations

Presentation Slides
A Unified Framework for Monetary Theory and Policy Analysis

891 Citations

Citation Type

Citation Type

Modeling monetary economies: an equivalence result
We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. The different approaches to modeling money—reduced-form vs. explicit… Expand
Money and Capital: A Quantitative Analysis
We study the effects of money (anticipated inflation) on capital formation. Previous papers on this topic adopt reduced-form approaches, putting money in the utility function or imposing cash in… Expand
Understanding Inflation as a Joint Monetary-Fiscal Phenomenon
We develop the theory of price-level determination in a range of models using both ad hoc policy rules and jointly optimal monetary and fiscal policies and discuss empirical issues that arise when… Expand
A Tractable Monetary Model under General Preferences TSZ-NGA
This paper studies an economy with both centralised and decentralised monetary exchanges under search frictions. A degenerate asset distribution is featured under a broad class of preferences… Expand
Money and Capital
The effects of money (anticipated inflation) on capital formation is a classic issue in macroeconomics. Previous papers adopt reduced-form approaches, putting money in the utility function, or… Expand
A new suggestion for simplifying the theory of money
TLDR
A new search-theoretic model of monetary exchange with indivisible assets, based on price posting instead of bargaining, and incorporating noisy search is proposed, which is suggested to become a benchmark model in monetary economics. Expand
Monetary policy and distribution
A segmented markets model of monetary policy is constructed, in which a novel feature is goods market segmentation, and its relationship to conventional asset market segmentation. The implications of… Expand
Heterogeneous Expectations and Micro-Foundations in Macroeconomics
Abstract This chapter provides an overview of recent models of heterogeneous expectations in macroeconomics. We begin with a description of household behavior in an environment with features common… Expand
A Tractable Monetary Model Under General Preferences
This article studies an economy with both centralized and decentralized monetary exchanges under search frictions. A degenerate asset distribution is featured under a broad class of preferences… Expand
The Liquidity-Augmented Model of Macroeconomic Aggregates
We propose a new model of the macroeconomy which is simple and tractable, yet explicit about the foundations of liquidity. Monetary policy is implemented via swaps of money for liquid bonds in a… Expand
...
1
2
3
4
5
...

References

SHOWING 1-10 OF 80 REFERENCES
Whither Monetary Economics
I argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential. The argument has two parts. First, I argue… Expand
A Search-Theoretic Approach to Monetary Economics
The essential function of money is its role as a medium of exchange. The authors formalize this idea using a search-theoretic equilibrium model of the exchange process that captures the "double… Expand
Money and Capital
The effects of money (anticipated inflation) on capital formation is a classic issue in macroeconomics. Previous papers adopt reduced-form approaches, putting money in the utility function, or… Expand
The Distribution of Money and Prices in Search Equilibrium
This article considers a search-theoretic model of monetary exchange. Agents bargain over both the amount of money and the quantity of goods to be exchanged in bilateral meetings, determining… Expand
State-Dependent Pricing, Inflation and Welfare. ∗
This paper investigates the welfare effects of infl ation in am onetary economy with search frictions and menu costs. Following Diamond (1993) we first analyze a version of the model where there is… Expand
Search, Bargaining, Money, and Prices
The goal of this paper is to extend existing search-theoretic models of fiat money, which until now have assumed that the price level is exogenous, by explicitly incorporating bilateral bargaining.… Expand
Search, Money and Capital: a Neoclassical Dichotomy
Recent work has reduced the gap between search-based monetary theory and mainstream macroeconomics by incorporating into the search model some centralized markets as well as some decentralized… Expand
A contribution to the pure theory of money
We analyze a general equilibrium model with search frictions and differentiated commodities. Because of the many differentiated commodities, barter is difficult because it requires a double… Expand
Search, inflation and capital accumulation
This paper constructs a model to integrate the search monetary theory into a neoclassical growth model. With divisible goods and money, the model is used to examine the relationship between money… Expand
Friedman Meets Hosios: Efficiency in Search Models of Money
This article studies optimal monetary policy in an economy with endogenous search decisions. We show that the same frictions that give fiat money a positive value generate an inefficient quantity of… Expand
...
1
2
3
4
5
...