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Paper #567

A search theory of money and commerce with Neoclassical production
Miquel Faig
Setembre 2001
This paper advances a highly tractable model with search theoretic foundations for money and neoclassical growth. In the model, manufacturing and commerce are distinct and separate activities. In manufacturing, goods are efficiently produced combining capital and labor. In commerce, goods are exchanged in bilateral meetings. The model is applied to study the effects of in▀ation on capital accumulation and welfare. With realistic parameters, inflation has large negative effects on welfare even though it raises capital and output. In contrast, with cash-in-advance, a device informally motivated with bilateral trading, inflation depresses capital and output and has a negligible effect on welfare.
Paraules clau:
Search, money, commerce, inflation, neoclassical production, capital accumulation, optimum quantity of money
Codis JEL:
E40, E52, E13
Àrea de Recerca:
Macroeconomia i Economia Internacional

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