New Approaches to Monetary Economics: Proceedings of the Second International Symposium in Economic Theory and Econometrics (International Symposia in Economic Theory and Econometrics (No. 2)) PDF
Preview New Approaches to Monetary Economics: Proceedings of the Second International Symposium in Economic Theory and Econometrics (International Symposia in Economic Theory and Econometrics (No. 2))
New Approaches to Monetary Economics brings together presentations of innovative research in the field of monetary economics. Much of this research develops and applies newly initiated approaches to modeling fi- nancial intermediation, aggregatef luctuations,m onetary aggregation, and transactions motivated monetary equilibrium. The contents of this volume comprise the proceedings of the second in a new conference series entitled International Symposia in Economic 2 Theory and Econometrics. This conference was held in 1985 at the IC (Innovation, Creativity, and Capital) Institute at the University of Texas 2 at Austin. The symposia in this series are sponsored by the IC Institute and the RGK Foundation. New Approaches to Monetary Economics, edited by Professors Wil- liam A. Barnett and Kenneth J. Singleton, consists of five parts. Part I examines transactions motivated monetary holding in general equilib- rium; Part II, financial intermediation; Part III, monetary aggregation theory; Part IV, issues in aggregate fluctuation; and Part V, theoretical issues in the foundations of monetary economics and macroeconomics. New approaches to monetary economics International Symposia in Economic Theory and Econometrics Editor William A. Barnett, University of Texas at Austin New approaches to monetary economics Proceedings of the Second International Symposium in Economic Theory and Econometrics edited by WILLIAM A. BARNETT University of Texas at Austin and KENNETH J. SINGLETON Carnegie-Mellon University The right of ike Unltertity of Cambridge to print and tell all manner ofbooks was granted by Henry Vlll in 1334. The Vntwtlty hat printed and publlthed continuously tine* 1384. CAMBRIDGE UNIVERSITY PRESS Cambridge New York New Rochelle Melbourne Sydney CAMBRIDGE UNIVERSITY PRESS Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo, Delhi Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521332651 © Cambridge University Press 1987 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 1987 Reprinted 1988 This digitally printed version 2008 A catalogue record for this publication is available from the British Library Library of Congress Cataloguing in Publication data International Symposium in Economic Theory and Econometrics (2nd : 1985 : Austin, Tex.) New approaches to monetary economics. (International symposia in economic theory and econometrics) 1. Monetary policy - Econometric models - Congresses. 2. Money supply - Econometric models - Congresses. I. Barnett, William A. II. Singleton, Kenneth J. III. Title. IV. Series. HG205.I565 1985 332.4'0724 87-5113 ISBN 978-0-521-33265-1 hardback ISBN 978-0-521-10049-6 paperback Contents Editors' introduction page vii List of contributors ix Part I: Transactions motivated monetary holdings in general equilibrium 1. Monetary dynamics with proportional transaction costs and fixed payment periods Sanford J. Grosman 3 2. A multiple means-of-payment model Edward C. Prescot 42 3. Credit policy and the price level in a cash-in-advance economy Michael Wodford 52 Part II: Financial intermediation 4. Preference shocks, liquidity, and central bank policy Sudipto Bhatacharya and Douglas Gale 69 5. Banking and macroeconomic equilibrium Ben Bernanke and Mark Gertler 89 Part III: Monetary aggregation theory 6. The microeconomic theory of monetary aggregation Wiliam A. Barnet 15 7. Monetary asset separability tests Apostolos Serletis 169 8. Money demand in open economies: a Divisia application to the U.S. case Jaime Marquez 183 vi Contents 9. Aggregation of monetary goods: a production model Diana Hancock 200 10. Money in the utility function: an empirical implementation James M. Poterba and Julio J. Rotemberg 219 11. Comment on papers in Part III Wiliam A. Barnet 241 Part IV: Issues on aggregate fluctuations 12. Asset prices in a time-series model with disparately informed, competitive traders Kenneth J. Singleton 249 13. Nominal surprises, real factors, and propagation mechanisms Robert G. King and Charles I. Plosser 273 14. A rational expectations framework for short-run policy analysis Christopher A, Sims 293 Part V: Theoretical issues in the foundations of monetary economics and macroeconomics 15. Pricing and the distribution of money holdings in a search economy, II Peter Diamond and Joel Yelin 311 16. The optimal inflation rate in an overlapping-generations economy with land Bennet T. McCalum 325 17. Some unsolved problems for monetary theory Neil Walace 340 18. Externalities associated with nominal price and wage rigidities John B. Taylor 350 Editors' introduction The contents of this volume comprise the proceedings of a conference 2 held at the IC Institute at the University of Texas at Austin on May 23- l 24, 1985. The conference title was "New Approaches to Monetary Eco- nomics," and it was organized to bring together presentations of some of the particularly innovative new research that recently has been under way in the field of monetary economics. Much of this research develops and applies recently initiated approaches to modeling financial intermedia- tion, aggregate fluctuations, monetary aggregation, and transactions mo- tivated monetary equilibrium. We believe that this conference included pathbreaking research and revealed some fundamental trends in the di- rection in which monetary economics research is beginning to move. The conference that produced this proceedings volume is the second in a new conference series, called International Symposia in Economic The- 2 ory and Econometrics. The symposia in the series are sponsored by the 2 IC Institute at the University of Texas at Austin and are cosponsored by the RGK Foundation. This second conference also was cosponsored by the Federal Reserve Bank of Dallas and by the Department of Economics and the Center for Statistical Sciences at the University of Texas at Aus- tin. Thef irstc onference in the series was co-organized by William Barnett and Ronald Gallant, who also co-edited the proceedings volume. That volume has appeared as the volume 30, October/November 1985 edition of the Journal of Econometrics. Beginning with this second symposium in the series, the proceedings of the symposia will appear as volumes in this new Cambridge University Press monograph series. The co-organizers of the second symposium and co-editors of this proceedings volume are William Barnett and Kenneth Singleton. The series is under the general editorship of William Barnett. 1 2 IC stands for Innovation, Creativity, and Capital. 2 The title of the series recently was changed from the Austin Symposia in Economics, as a result of the increasingly international nature of the symposia in the series. vii
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