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The Non-Superneutrality of Money and its Distributional Effects when Agents are Heterogeneous and Capital Markets are Imperfect

Author

Listed:
  • Riccarda Longaretti

    (Department of Economics, University of Milan-Bicocca)

  • Domenico Delli Gatti

    (ITEMQ, Catholic University of Milan)

Abstract

In this paper we develop an OLG model with heterogeneous agents, money and bequests, introducing occupational choice and financing constraints when capital markets are imperfect. We show how, under appropriate conditions, all the moments of the distribution are affected by changes in money growth. More precisely, if capital markets are imperfect and heterogeneous agents are liquidity constrained, investment in fixed capital is not efficient and aggregate wages and profits depend on the availability of loanable funds. An increase in money growth may imply a more efficient aggregate investment. Therefore aggregate product and wealth positively depend on an acceleration in money growth.

Suggested Citation

  • Riccarda Longaretti & Domenico Delli Gatti, 2006. "The Non-Superneutrality of Money and its Distributional Effects when Agents are Heterogeneous and Capital Markets are Imperfect," Working Papers 95, University of Milano-Bicocca, Department of Economics, revised May 2006.
    • Handle: RePEc:mib:wpaper:95
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    References listed on IDEAS

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    1. Riccarda Longaretti & Domenico Delli Gatti, 2002. "Monetary Policy and the Distribution of Wealth in a OLG Economy with Heterogeneous Agents, Money and Bequests," Working Papers 60, University of Milano-Bicocca, Department of Economics, revised Oct 2002.
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    Cited by:

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    2. Hiroaki Hayakawa, 2020. "Consumer behavior in a monetary economy and smoothing of composite consumption," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 89-122, March.
    3. Ferrari, Massimo, 2014. "The financial meltdown: a model with endogenous default probability," MPRA Paper 59419, University Library of Munich, Germany.

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