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Purdue Computational Finance Program


The Distribution of Balances and the Non-Neutrality of Money

March 12, 2004
2:30 p.m.

BRNG B222

Professor Gabriele Camera, Krannert Graduate School of Management, Purdue University

Abstract:

We construct a model where agents hold money for transactions purposes, and trade on a sequence of spot markets during a period. Agents choose spending strategies and cash holdings taking into account expected cash flows. Because buying and selling opportunities are idiosyncratic, intra-period heterogeneity in money holdings emerges. Due to this distribution, money transfers may increase output and welfare, in the short-run.


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