RT Generic
T1 A search-theoretic monetary business cycle model with capital formation
A1 Menner, Martin
AB Search-theory has become the main paradigm for the micro-foundation of money. But no comprehensive business cycle analysis has been undertaken yet with a search-based monetary model. We extend the model with divisible goods and divisible money of Shi (JET, 1998) to allow for capital formation, analyze the monetary propagation mechanism and contrast the model's implications with US business cycle stylized facts. With empirically plausible adjustment costs the model features a persistent propagation of monetary shocks and is able to replicate fairly well the volatility and cross-correlation with output of key US time series, including sales and inventory investment. We find that monetary policy shocks are unlikely to be an important source of business cycle fluctuations but discover another dimension where money matters: the very frictions that make money essential shape also the responses of variables to real shocks.
SN 2340-5031
YR 2005
FD 2005-10
LK https://hdl.handle.net/10016/362
UL https://hdl.handle.net/10016/362
LA eng
LA eng
DS e-Archivo
RD 3 jun. 2024