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A Search-Theoretic Monetary Business Cycle Model with Capital Formation
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Martin Menner
Veröffentlicht/Copyright:
2. November 2006
Abstract
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. This paper extends the model with divisible goods and divisible money of Shi (JET, 1998) to allow for capital formation, analyses the monetary propagation mechanism and contrasts the model's implications with US business cycle stylized facts. The propagation mechanism based on a feedback between increased search intensity and depleted inventories only survives in the presence of non-negligible capital adjustment costs. With intermediate adjustment costs the model is able to replicate fairly well the volatility and cross-correlation with output of key US time series, including sales and inventory investment.
Keywords: search-theory of money; DSGE model; capital formation; business cycle; propagation mechanism
Published Online: 2006-11-02
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Schlagwörter für diesen Artikel
search-theory of money;
DSGE model;
capital formation;
business cycle;
propagation mechanism
Artikel in diesem Heft
- Heterogeneity in Price Stickiness and the Real Effects of Monetary Shocks
- Frontiers Article
- 10.2202/1534-6013.1320
- Advances Article
- Monetary Policy and Uncertainty about the Natural Unemployment Rate: Brainard-Style Conservatism versus Experimental Activism
- Quantifying the Effects of the Demographic Transition in Developing Economies
- Inflation, Prices, and Information in Competitive Search
- Contributions Article
- Inflation Inertia in Sticky Information Models
- Job Separation Under Uncertainty and the Wage Distribution
- A Closed Form Solution to the Ramsey Model
- Convergence and Stability in U.S. Employment Rates
- What Does the Solow Model Tell Us about Economic Growth?
- Consumption and Health
- Capital Maintenance versus Technology Adoption Under Embodied Technical Progress
- Let a Thousand Models Bloom: The Advantages of Making the FOMC a Truly 'Open Market'
- Does Inflation Grease the Wheels of the Labor Market?
- The Relative Price and Relative Productivity Channels for Aggregate Fluctuations
- A Search-Theoretic Monetary Business Cycle Model with Capital Formation
- Price-Level Determinacy, Lower Bounds on the Nominal Interest Rate, and Liquidity Traps
- Real Business Cycle Theory and the Great Depression: The Abandonment of the Abstentionist Viewpoint
- Topics Article
- Contracts and Money Revisited
- On the Use of Substitutability as a Measure of Competition
- Can the AK Model Be Rescued? New Evidence from Unit Root Tests with Good Size and Power
- How Tight Should One's Hands be Tied? Fear of Floating and the Credibility of Exchange Rate Regimes
- Uncertainty and Debt-Maturity in Emerging Markets
- Quantitative Monetary Easing and Risk in Financial Asset Markets
- Using Investment Data to Assess the Importance of Price Mismeasurement
- Biased Technical Change and Capital-Labour Substitution in Finland, 1902-2003
- Long-Run Money Growth and the Liquidity Effect
- Differentiability of the Efficient Frontier when Commitment to Risk Sharing is Limited
- A Model of Veblenian Growth
- Human Capital Composition, R&D and the Increasing Role of Services
- The Allocation of Labor and Endogenous Search Decisions
- Bank Lending with Imperfect Competition and Spillover Effects
- Convergence Across Italian Regions and the Role of Technological Catch-Up
