Working Paper: NBER ID: w0978
Authors: Julio J. Rotemberg
Abstract: This paper presents the competitive equilibrium of an economy in which people hold money for transactions purposes. It studies both the steady states which result from different rates of monetary expansion and the effects of such non-steady state events as an open market operation. Even though the model features no uncertainty and perfect foresight, open market operations affect aggregate output. In particular, a simultaneous increase in money and governmental holdings of capital temporarily raises aggregate capital and output while it lowers the real rate of interest on capital.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increase in money supply and government holdings of capital (E50) | temporary rise in aggregate capital (E22) |
| increase in money supply and government holdings of capital (E50) | temporary rise in output (E32) |
| increase in money supply and government holdings of capital (E50) | lower real interest rate on capital (E43) |
| one-period monetary expansion (E19) | higher level of output that persists over time (E23) |
| monetary policy (E52) | influence on aggregate output (E23) |
| monetary policy (E52) | effects on consumption and capital accumulation over time (E21) |