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NONNEUTRALITY OF MONEY IN DISPERSION: HUME REVISITED
Author(s) -
Jin Gu,
Zhu Tao
Publication year - 2019
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12387
Subject(s) - economics , monetary economics , matching (statistics) , inflation (cosmology) , deflation , dispersion (optics) , econometrics , keynesian economics , monetary policy , mathematics , physics , statistics , optics , theoretical physics
For a class of standard and widely used preferences, a one‐shot money injection in a standard matching model can induce a significant and persistent output response by dispersing the distribution of wealth. Decentralized trade matters for both persistence and significance. Following the injection, the price response may be sluggish, the markup may move up with output, and both the interest rate and the inflation rate may drop below their trend levels.