Assets, General Equilibrium and the Neutrality of Money

descriptionPublicationkeyboard_double_arrow_right Article 01 Jan 1984Publisher:Oxford University Press (OUP)Journal:The Review of Economic Studies, volume 51, page 129 (issn: 0034-6527,

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Authors: Chamley, Christophe; Polemarchakis, Herakles;

doi: 10.2307/2297709

Assets, General Equilibrium and the Neutrality of Money

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Abstract

When government liabilities (including money) are held in private portfolios only as stores of value and do not provide additional services (such as liquidity), real variables are not affected by changes in the money supply due to the government's trading in real assets (open market operations). This neutrality of monetary policy fails if the government either trades in nominal assets, or it distributes subsidies and levies taxes.

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Keywords

Trade models, neutrality of money

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