TY  - JOUR
AU  - Lucas,Robert E., Jr.
AU  - Stokey,Nancy L.
TI  - Money and Interest in a Cash-in-Advance Economy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1618
PY  - 1987
Y2  - October 1987
UR  - http://www.nber.org/papers/w1618
L1  - http://www.nber.org/papers/w1618.pdf
N1  - Author contact info:
Robert E. Lucas, Jr.
Department of Economics
The University of Chicago
1126 East 59th Street
Chicago, IL  60637
Tel: 773/702-8179
Fax: 773/702-8490
E-Mail: relucas@midway.uchicago.edu

Nancy Stokey
Department of Economics
University of Chicago
1126 East 59th Street
Chicago, Illinois  60637
E-Mail: n-stokey@uchicago.edu
AB  - In this paper we analyze an aggregative general equilibrimi model in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. We develop methods for verifying the existence of, characterizing, and explicitly calculating equilibria. A main result of the analysis is that current money growth affects the current real allocation only insofar as it affects expectations about future money growth, i.e., only through its value as a signal.
ER  -