Dixon, Huw David ![]() ![]() |
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Abstract
We show a simple way to introduce monopolistic competition in a general equi- librium model where prices are fully flexible, the velocity of money is variable and cash-in-advance (CIA) constraints occasionally bind. We establish the conditions under which money has real e¤ects and demonstrate that an equilibrium that occurs at a binding CIA constraint is welfare inferior to any equilibrium that occurs at a non- binding CIA constraint with the same level of technology. We argue that even though the probability of a binding CIA constraint can be increasing with money supply, under certain conditions, expansionary money supply is welfare improving.
Item Type: | Monograph (Working Paper) |
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Date Type: | Publication |
Status: | Published |
Schools: | Business (Including Economics) |
Subjects: | H Social Sciences > HB Economic Theory |
Uncontrolled Keywords: | Cash-in-advance; general equilibrium; monopolistic competition |
Publisher: | Cardiff Business School |
Date of First Compliant Deposit: | 30 March 2016 |
Last Modified: | 09 Aug 2024 13:55 |
URI: | https://orca.cardiff.ac.uk/id/eprint/43587 |
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