An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment
We develop a New Monetarist model with expenditure and unemployment risks that generates equilibria with non-degenerate distribution of money holdings. Distributional effects can overturn key insights of the model with degenerate distributions, e.g., the value of money depends on the income distribution; a one-time money injection raises aggregate real balances in the short run price adjustments look sluggish; anticipated inflation can raise output and welfare; there can be a long-run trade-o¤ between inflation and unemployment. Distributional effects also generate a quantitatively significant aggregate demand channel through which transfers financed with money creation can raise employment, and productivity shocks are amplified.
Document Object Identifier (DOI): 10.3386/w25220
Published: Guillaume Rocheteau & Pierre-Olivier Weill & Tsz-Nga Wong, 2019. "An Heterogeneous-Agent New-Monetarist Model with an Application to Unemployment," Journal of Monetary Economics, .