money and capital abstract the effects of money anticipated inflation on capital formation is a classic issue in macroeconomics previous papers adopt reduced form approaches putting money in the utility function or imposing cash in advance but using otherwise frictionless models we follow instead a literature that tries to be explicit about the frictions making money essential this introduces new elements including a two sector structure with centralized and decentralized markets stochastic trading opportunities and bargaining these elements matter quantitatively and numerical results differ from findings in the reduced form literature the analysis also reduces a gap between microfounded monetary economics and mainstream macro

the nonlinear time series properties of unemployment rates some further evidence the time series properties of unemployment rates for germany japan the uk and the us are re examined evidence of nonlinear structure in the residuals of the most parsimonious linear arma models is reported for all countries except japan modelling this nonlinearity using setar models suggests strong asymmetry in unemployment dynamics and the presence of a possible limit cycle for the uk however residual diagnostics for these models indicate remaining structure alternative tar models conditioned on past growth rates of industrial production yield substantial reductions in residual variance over both linear and setar counterparts iid residuals in all cases other than the us and threshold values at or very near zero clearly identifying the asymmetric behaviour of unemployment during expansionary and contractionary phases of the business cycle

general equilibrium with nonconvexities and money in a general equilibrium economy with nonconvexities there are sunspot equilibria with good welfare properties sunspots can ameliorate the effects of the nonconvexities for these economies we show that agents act as if they have quasi linear utility functions we use this result to construct a new model of monetary exchange along the lines of lagos and wright where trade occurs in both centralized and decentralized markets but instead of quasi linear preferences we assume general preferences but with indivisible labor this suggests that modern monetary theory is more robust than one might have thought it also constitutes progress on the classic problem of integrating monetary economics and general equilibrium theory

money and loans agents expect to trade with each other infinitely often but face a temporal absence of a coincidence of wants when they meet only loans and or money can facilitate exchange in small close knit economies enduring trade relationships are valued and loans are optimal in larger economies with limited communication information concerning repayment of loans diffuses too slowly to deter agents from reneging unless loans are severely restricted in magnitude money has no such redeemability problems but if clower constraints bind loans help supplement money purchases so that both become essential roles of various institutions and the historical evolution of media of exchange are explained

the effects of firm optimizing behaviour in matching models this paper considers a matching model of which the search behaviour of jovanovic 1979 and albrecht and jovanovic 1984 are special cases the nature of the generality is that each unemployed worker has more information than firms about his average productivity this results in wage offers falling over the length of an unemployment spell because a long spell is a signal of lower than average productivity the results of the paper are similar to the scarring effect of heckman and borjas 1980 and greenwald 1986 and the discouraged worker effect of schweitzer and smith 1974

on the future of macroeconomics a new monetarist perspective this article argues that a pressing goal for macroeconomics is to incorporate financial considerations but we need models with solid microfoundations in particular the use of assets in facilitating exchange as well as different credit or other financial arrangements should be outcomes of not inputs to theories as a preview i suggest that mainstream macro does a good job explaining many phenomena and a financial crisis does not disprove such theory but understanding crises requires better incorporating factors related to money credit banking and liquidity the approach called new monetarist economics can help a lot in this regard

the structure of simple general equilibrium models with frictional unemployment we develop a two sector general equilibrium model in which equilibrium unemployment arises endogenously because of trading frictions in the labor market of one sector externalities inherent in the search process lead to inefficient equilibria and this has important implication for the basic structure of the economy in particular the relationship between factor rewards and commodity prices is fundamentally different from the analogous relationship in a frictionless economy one implication is that the economy s relative supply curve may be downward sloping especially when the search sector is small we also present several applications of the analysis

james tobin an appreciation of his contribution to economics jim tobin who died on march 11 2002 at the age of 84 was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation tobin s influence on macroeconomic theory is so pervasive so much part of our professional acquis that many younger economists often are not even aware that it is his ideas they are elaborating testing criticising refuting or re inventing in this appreciation i consider tobin s scholarly contributions made over a period of more than 50 years tobin received the 1981 nobel memorial prize for his analysis of financial markets and their relations to expenditure decisions employment production and prices i consider his contributions to mean variance portfolio demand and asset pricing theory especially the portfolio separation theorem pitfalls in financial model building portfolio balance and flow of funds models and the credit channel the life cycle model and social security econometric methodology including the tobit estimator and his pioneering work using both time series and cross sectional data to estimate food demand functions economic growth tobin s q the tobin tax the monetary and fiscal policy effectiveness debate first with milton friedman and then with the new classical macroeconomics and real business cycle schools and tobin s approach to methodological questions including microfoundations and aggregation

inflation indexed bonds and nominal bonds financial innovation and precautionary motives this paper introduces a two period monetary general equilibrium model with proportional transaction costs on nominal and inflation indexed bonds this paper demonstrates that financial innovation on indexed bonds causes equilibrium interest rates of the nominal bond to increase when agents have precautionary saving motives this result implies that ignoring precautionary motives would underestimate savers welfare gain and overestimate borrowers welfare gain from innovation on indexed bonds

money and credit redux do we need both money and credit in models with explicit roles for payment instruments we show the answer is no if credit is easy money is useless if credit is tight money can be essential but then credit is irrelevant and changes in debt limits are neutral real balances respond endogenously to leave total liquidity constant this is true for exogenous or endogenous policy and debt limits secured or unsecured credit and fairly general preferences and pricing mechanisms while we also show how to overturn some results the benchmark model suggests credit conditions matter less than some people think

turnover externalities with marketplace trading this article considers equilibrium decentralized trade when there is a marketplace where buyers and sellers meet costlessly since buyers have idiosyncratic match payoffs for each seller s good some buyers rather than trade with the current stock of sellers wait for new sellers to enter the marketplace to obtain a good they like a turnover externality exists where all traders are better off with higher entry rates of new traders furthermore this turnover externality supports multiple pareto rankable equilibria this provides new insights into similar results obtained in the random matching literature

learning matching and growth we examine an endogenous growth model in which market frictions are an integral part of the economic environment workers invest in education when young which raises their productivity onice employed the level of schooling also acts as a key determinant of the rate of economic growth by influencing workers ability to accumulate additional human capital on the job once schooling is completed workers search for employment the division of the surplus between vacancies and searching workers is characterized as is the optimal level of education the economy may display multiple steady state growth paths

inflation and unemployment in general equilibrium when labor is indivisible there exist ecient outcomes with some agents randomly unemployed rogerson 1988 we integrate this idea into the modern theory of monetary exchange where some trade occurs in centralized markets and some in decentralized markets as in lagos and wright 2006 this delivers a general equilibrium model of unemployment and money with explicit microeconomic foundations we show the implied relation between inflation and unemployment can be positive or negative depending on simple preference conditions our phillips curve provides a long run exploitable trade o for monetary policy it turns out however that the optimal policy is the friedman rule

a dynamic model of trade frictions and disequilibrium in the housing market a dynamic stock flow model is developed to analyze and simulate housing markets with partial rent control trade frictions and spillovers a notion of equilibrium is suggested and related to walrasian equilibrium existence uniqueness and comparative statics properties of equilibria are analyzed in some examples of housing markets with and without price control stability properties and dynamic responses to demand and supply shocks are studied by means of computer simulations in a final simulation experiment a black market for rent controlled dwelling units is introduced

viewpoint a microfoundation of monetary economics in this lecture i explain what the microfoundations of money are about and why they are necessary for monetary economics then i review recent developments of a particular microfoundation of money commonly known as the search theory of money finally i outline some unresolved issues dans cette presentation l auteur explique ce que sont les microfondations de la monnaie et pourquoi elles sont necessaires a l economie monetaire ensuite il passe en revue certains developpements recents d une microfondation particuliere de la monnaie connue sous le nom de theorie de la recherche de la monnaie enfin l auteur fait le tour d un ensemble de problemes qui restent sans solution pour le moment

bidding for money we analyze monetary exchange in a model that allows for directed search and multilateral matches we consider environments with divisible goods and indivisible money and compare the results with those in models that use random matching and bilateral bargaining two different pricing mechanisms are used ex ante price posting and ex post bidding auctions also we consider settings both with and without lotteries we find that the model generates very simple and intuitive equilibrium allocations that are similar to those with random matching and bargaining but with different comparative static and welfare properties

trading uncertainty and market form this paper examines purely random multilateral matching among a large number of informationally isolated individuals who desire to trade the structure of links among traders is characterized by means of random graphs defined by a parameter that is chosen by prospective traders trading groups of all sizes including pairs as a special case result but the size distribution may contain a mass point at infinity that is within a certain subset of the entire economy trading uncertainty is entirely eliminated the equilibrium price distribution consists of a mass point and of a mixture of densities copyright 1990 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

endogenous market formation and monetary trade an experiment the theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange however endogenizing the exchange process is critical for understanding the conditions that support the use of money we develop a traveling game to study the emergence of decentralized and centralized exchange theoretically and experimentally players located on separate islands can either trade locally or pay a cost to trade elsewhere so decentralized and centralized markets can both emerge in equilibrium the former minimize trade costs through monetary exchange the latter maximizes overall surplus through nonmonetary exchange monetary trade emerges when coordination is problematic whereas centralized trade emerges otherwise this shows that to understand the emergence of money it is important to amend standard theory such that the market structure is endogenized

strategic choices in pluralist and unitarist employment relations regimes a study of australian telecommunications using interview data collected between 1992 and 2009 the authors explore how deregulation of the australian telecommunications sector and re regulation of the labor market affected employment relations er strategies at telstra australia s former telecommunications monopoly labor market re regulation reversed much of the previous institutional support for union activity and unions struggled to adjust to this changed institutional context telstra s er strategies included large scale downsizing and outsourcing it moved dramatically toward unitarist anti union er approaches with a shift away from collective bargaining toward individual employment contracts this history raises a more general question of the extent to which employers make strategic er choices autonomously and the extent to which such choices reflect the influence of the national institutional context the authors conclude that while the changing institutional context in this case primarily government regulation facilitated telstra s strategic choices management ideology was an important intervening variable in determining such choices

search for a theory of organized crimes abstract casual empirical observations reveal no systematic relationship between the overall crime rate and organized criminal activity we develop a search theoretic framework to study the interactions not only between formal labor and crime sectors but also between individual and organized crimes in equilibrium individual and organized criminals face different arrest risks success rates reward structures and outside options we characterize agents occupational choices the gang s hierarchical structure and the responses of unemployment crime rates and crime composition to changes in labor market conditions and crime deterrence policies we further assess the effectiveness of arrest versus punishment policies in deterring individual and organized crimes

asset liquidity and indivisibility abstract we study asset liquidity in a search theoretic framework where divisible assets can facilitate exchange for an indivisible consumption good the distinctive characteristics of our theory are that the asset dividend can be either positive or negative and buyers can choose whether or not to carry the asset and trade for the indivisible good buyers participation determines the demand for asset liquidity thus the asset price carries a liquidity premium component which reflects the function of the asset in facilitating trade the economy features multiple equilibria when the asset dividend is negative due to the trade off between the probability of trade and the endogenous cost of holding assets

commitment advertising and efficiency of two sided investment in competitive search equilibrium abstract competitive search entails both commitment to and advertising of pay off relevant aspects of market participants this paper considers incrementally the implications of each in a labor market where both workers and firms invest prior to market entry a wide range of institutional arrangements are addressed within the same general framework when the characteristics of jobs or workers are advertised the efficient outcome pertains commitment without advertising typically leads to market unravelling the diamond paradox but whenever wages and human capital are advertised firms become residual claimants the private and social returns to investment coincide absent wage commitment the hosios condition implies efficiency when investments are advertised

a contribution to the pure theory of money abstract this article analyzes a general equilibrium model with search frictions and differentiated commodities because of the many differentiated commodities barter is difficult in that it requires a double coincidence of wants and this provides a medium of exchange role for fiat currency we prove the existence of equilibrium with valued fiat money and show it is robust to certain changes in the environment rate of return dominance liquidity and the welfare implications of fiat money are discussed

on the welfare properties of fractional reserve banking monetary economists have long recognized a tension between the benefits of fractional reserve banking such as the ability to undertake more profitable long term investment opportunities and the difficulties associated with it such as the risk of insolvency for each bank and the associated losses to bank liability holders i show that a specific banking arrangement a joint liability scheme provides an effective mechanism for ensuring the ex post transfer of reserves from liquid banks to illiquid banks so it is possible to select a socially efficient reserve ratio in the banking system that preserves the safety of bank liabilities as a store of value and maximizes the rate of return paid to bank liability holders

the transition from barter to fiat money how did it become possible to exchange apparently valueless pieces of paper for goods this paper provides an equilibrium account of the transition between barter and fiat money regimes the explanation relies on the intervention of a self interested government that must be able to promise credibly to limit the issue of money to achieve credibility the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money the government s patience and the extent of its involvement in the economy are key determinants of whether the transition can be accomplished copyright 1995 by american economic association

changing trade structure and its implications for growth there is a long tradition in the development literature that what a country exports matters for its growth prospects recent work has refocused on this issue by attempting to produce numerical scores for different types of product to identify the complexity or sophistication of a country s export basket based on the insight that the type of product an economy exports can have important implications for its economic performance and that goods exported predominantly by rich countries will have different characteristics from those exported by poor countries lall et al 2006 put forward a means of classifying commodities based on the income levels of a product s main exporters at around the same time hausmann et al 2006 following a similar approach put forward a slightly different form of product classification and rodrik 2006 applied this specifically to an analysis of china this paper highlights the difference between the approaches and its implications for the analysis of china which appears less special using the approach of lall et al it argues that the classification of products at a disaggregate level is a helpful starting point for assessing issues of trade competitiveness and that further work using either or both forms of classification is justified

a dynamic equilibrium model of search production and exchange we study a general equilibrium model where agents search for production and trading opportunities that generalizes the existing literature by considering a large number of differentiated commodities and agents with idiosyncratic tastes thus agents must choose nontrivial exchange as well as production strategies we consider decreasing constant and increasing returns to scale in the matching technology and characterize the circumstances under which there exist multiple steady state equilibria or multiple dynamic equilibria for given initial conditions we also characterize the existence of dynamic equilibria that are limit cycles equilibria are not generally optimal and when multiple equilibria coexist they may be ranked we analyze comparative statics and find that certain intuitive results do not necessarily hold without restrictions on the stochastic structure