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
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903 Citations
Highly Influential Citations
186
Background Citations
399
Methods Citations
207
Results Citations
39

903 Citations

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Citation Type

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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
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References

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