Money and Interest in a Cash-in-Advance Economy

descriptionPublicationkeyboard_double_arrow_right Report , Article , Research , Preprint 01 May 1985Publisher:National Bureau of Economic ResearchJournal:Econometrica, volume 55, page 491 (issn: 0012-9682,

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Authors: Robert E. Lucas Jr.; Nancy L. Stokey;

doi: 10.3386/w1618 , 10.2307/1913597

handle: 10419/220987

Money and Interest in a Cash-in-Advance Economy

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Abstract

We analyze an aggregate general equilibrium model in which the use of money is motivated by a cash-in-advance constraint, applied to purchases of a subset of consumption goods. The system is subject to both real and monetary shocks, which are economy-wide and observed by all. We develop methods for verifying the existence of, characterizing, and explicitly calculating equilibria.

Related Organizations

University of Chicago
United States
Northwestern University
United States
National Bureau of Economic Research
United States

Keywords

real and monetary shocks, ddc:330, monetary policy, General equilibrium theory, interest rates, cash-in-advance

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