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Can indeterminacy explain the short-run non-neutrality of money?

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  • De Fiore, Fiorella

Abstract

This paper analyzes the possibility to generate indeterminacy and equilibria with short-run non-neutrality of money in a model with flexible prices, constant returns to scale in production and constant money growth rules. The model recovers previous results in the literature as particular cases. It is shown that real effects of monetary shocks, as observed in the data, can arise in four regions of the parameter space. Two regions are characterized by unreasonable assumptions, which lead to inferiority of consumption or leisure. Two regions are characterized by reasonable assumptions and by normality of the goods. However, real effects of monetary shocks require implausible parameter values. JEL Classification: E13, E40, E52

Suggested Citation

  • De Fiore, Fiorella, 2000. "Can indeterminacy explain the short-run non-neutrality of money?," Working Paper Series 32, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:200032
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp032.pdf
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    Citations

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    Cited by:

    1. Tomat, Gian Maria, 2002. "Durable goods, price indexes and quality change: an application to automobile prices in Italy, 1988-1998," Working Paper Series 0118, European Central Bank.
    2. Lawrence J. Christiano & Massimo Rostagno, 2001. "Money Growth Monitoring and the Taylor Rule," NBER Working Papers 8539, National Bureau of Economic Research, Inc.
    3. De Fiore, Fiorella & Teles, Pedro, 2003. "The optimal mix of taxes on money, consumption and income," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 871-887, May.
    4. De Fiore, Fiorella & Teles, Pedro, 2003. "The optimal mix of taxes on money, consumption and income," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 871-887, May.

    More about this item

    Keywords

    indeterminacy; neutrality of money; transactions costs;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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