2 edition of Optimal monetary policy with endogenous entry and product variety found in the catalog.
Optimal monetary policy with endogenous entry and product variety
Florin Ovidiu Bilbiie
|Statement||Florin O. Bilbiie, Ippei Fujiwara, Fabio Ghironi|
|Series||NBER working paper series -- working paper 17489, Working paper series (National Bureau of Economic Research : Online) -- working paper no. 17489.|
|Contributions||Fujiwara, Ippei, Ghironi, Fabio, National Bureau of Economic Research|
|The Physical Object|
|LC Control Number||2011657374|
On the other hand, the focus on ultimate means allows us to study monetary policy from a far more general point of view than is usually done. Thus there seems to be a case for the government to impose a paper money, any quantities of which can be produced at virtually zero cost. There is nothing wrong with it, lest one were to assume that the interests of the happy few who thrive on the perpetuation of the inflationary regime were identical with the interests of all members of society. Third, we have to consider again that the higher nominal receipts do not reflect a higher purchasing power. Credit Money Deflation Historically, deflation often occurred when monetary authorities redeemed credit money without neutralizing these redemptions through new issues, or when they destroyed paper money received as taxes. And successful entrepreneurs will do precisely that.
We cannot say on a priori grounds how much money any given market participant will choose to hold. If he cannot bring the other market participants to accept his product, we may conclude that the citizens prefer the greater variety, and the greater uncertainty, of a heterogeneous monetary system to the increased certainty under a unified system. The simple reason is that disequilibrium is tantamount to profit opportunities. But hoarding will not necessarily disrupt production, because it can be anticipated. Specifically, a long-run positive negative rate of inflation is optimal when the benefit of variety to consumers falls short of exceeds the market incentives for creating that variety under flexible prices, governed by the desired markup. In particular, we left out all questions pertaining to the political evaluation of its workings, that is, to the question of whether monetary laissez-faire is a good or a bad thing.
Workers and entrepreneurs certainly can find wage-rate agreements that make the continued operation of the firm possible. Quite to the contrary, such anticipations have the character of a self-fulfilling prophecy. If changes of the money supply brought about positive consequences by mere accident, so that negative consequences were as likely to follow from the policy of changing the money supply, it would be meaningless to speak of monetary policy at all, and central banks and other authorities in charge of it should be abolished at once. Our results point to the need for continued empirical research on the determinants of markups and investigation of the benefit of product variety to consumers.
Great days at Lancaster Park
Three American bishops
Derbyshire industrial archaeology directory
United States security agreements and commitments abroad.
Financing Local Government.
Court life below stairs
list of books and pamphlets in the National Art Library, South Kensington Museum
phantom of the Poles.
Vendetta in Spain.
But once this flight has set in, it cannot be prevented with the conventional means of monetary policy. If gold were as common as iron, so that a wagonload would be needed to pay for a suit, it would not be used as a medium of exchange.
When it comes to the means by which these ends are to be reached, the discussion stops altogether and gives way to a description of the technicalities of open market policies, discount rates, reserve requirements, and so on. However, technological calculations do greatly benefit from common weights and measures, because this commonality facilitates communication among the different members of society.
The difference between successful businessmen and incompetent spendthrifts is that the former do base their actions on a correct estimate of future price changes.
If the quantity of money is increased, the purchasing power of each unit will decrease below the level it would otherwise have attained. In: International Finance Discussion Papers.
In short, there are no general rules to determine how much money a man will hold.
In short, changes in the money supply have a real impact, both in the short run and in the long run, and this impact exists quite independent of whether the market participants are smart enough to anticipate the ongoing changes in the quantity of money.
They are entrepreneurs, who seek to anticipate relevant future changes. The answer to this question is patent. The task of monetary policy is therefore to ensure correspondence between money and the other goods, and it pursues this goal by modifying the quantity of money.
Imagine for instance that somebody would suddenly find a mine containing more than a million times the quantity of gold in existence. For the same reason, whatever the quantity produced of any of these monies in a free market is the optimal quantity. Now suppose further that the economy grows and that as a consequence the purchasing power of gold constantly increases.
The Nonutilitarian Case for Monetary Laissez-Faire So far we have described how money would be produced on a free market. This will decrease prices even further, thus reinforcing the bearishness of these people, who then increase their demand for money even more, and so on.
Price indexation implies even larger deviations from long-run price stability. Changes in the money supply always and everywhere have a permanent impact on the real economy, irrespective of whether those changes result from the market process itself or are politically induced.
It does not drop out of the clouds as an entirely uncaused plague, but is the natural consequence of a previous regime of more or less extended inflation. Such a policy would affect the distribution of wealth within society, and only accidentally have a positive impact on aggregate production.
The negative consequences that are commonly associated with inflation—in particular, the waste of resources due to adjustment problems—do not primarily spring from increases of the quantity of money, but from the lack of currency competition.
AB - Deviations from long-run price stability are optimal in the presence of endogenous entry and product variety in a sticky-price model in which price stability would be optimal otherwise Long-run inflation deflation is optimal when the benefit of variety to consumers falls short of exceeds the market incentive for creating that variety-the desired markup; Price indexation exacerbates this mechanism.
In such a case, an adjustment theorist could argue, one also needs more money to buy these greater quantities of goods, lest money prices would drop and strangle production. But increasing prices are not more harmful than declining prices. Another solution is to use a different metal, the purchasing power per weight unit of which makes it expedient to use coins made out of this metal for buying and selling those goods that can no longer be conveniently exchanged for gold.Optimal Monetary Policy with Endogenous Entry and Product Variety, (with Florin Bilbiie and Fabio Ghironi),Journal of Monetary Economics 64, Indeterminacy and Forecastability, (with Yasuo Hirose),Journal of Money, Credit and Banking 46(1), Optimal Monetary Policy with Endogenous Entry and Product Variety.
We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry.
Optimal monetary policy with endogenous entry and product variety. Request a Copy. link to publisher version Deviations from long-run price stability are optimal in the presence of endogenous entry and product variety in a sticky-price model in which price stability would be optimal otherwise Long-run inflation (deflation) is optimal when Cited by: The Time Inconsistency of Delegation-Based Time Inconsistency Solutions in Monetary Policy.
Journal of Optimization Theory and Applications,BILBIIE F.O. (). Nov 27, · Book chapters will be unavailable on Saturday 24th August between 8ampm BST. This is for essential maintenance which will provide improved performance going forwards. Optimal monetary policy with endogenous entry and product variety.
Journal of Monetary Economics 64, 1 () Optimal monetary policy with staggered wage and price. Nov 15, · Therefore the only logical alternative of politically induced changes in the money supply, namely, laissez-faire, is the optimal monetary policy.
It might be objected from the very outset that this approach cannot possibly warrant the conclusion it is supposed to yield, because the focus on the production of money is far too narrow to do.