NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Framework for studying Monetary Non-Neutrality

Robert E. Hall

NBER Working Paper No. 3145
Issued in October 1989
NBER Program(s):   EFG

This paper sets forth a simple general structural model of aggregate output, the interest rate, and the price level. The core of the model is the determination of the level of output as a product-market equilibrium, either competitive or oligopolistic, possible indeterminate because of thick-market externalities. Monetary non-neutrality can affect either product demand or product supply. In either case, monetary policy has leverage over output as well as the price level. The paper develops a two-diagram analysis intended to replace the aggregate demand-aggregate supply diagram.

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Document Object Identifier (DOI): 10.3386/w3145

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