Abstract
We propose in this chapter a theoretical and empirical study of the effects of monetary shocks through a cash in advance constraint on the French and American business cycle, in an intertemporal general equilibrium setting. The cash in advance model of Cooley and Hansen [1989] is extended to include current investment in the cash constraint. This last specification gives a role to monetary disturbances in short run dynamics of the model.
The stochastic simulation of the model and its comparison with French and American data show that the model is able to mimic the real dimension of the business cycle. Nevertheless, the nominal dimension is not correctly reproduced in such a monetarized neoclassical model.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Bibliography
A. Abel. Dynamic Behavior of Capital Accumulation in a Cashin-Advance Model. Journal of Monetary Economics, 16(1):55–71, January 1985.
R. Barro. Unanticipated Money Growth and Economic Activity. In R. Barro, editor, Money, Expectations and Business Cycles, chapter 5, Academic Press, New-York, 1981.
O. Blanchard and C. Kahn. The Solution of Linear Difference Models under Rational Expectations. Econometrica, 48(5):1305–1311, July 1980.
O. Blanchard. A Traditional Interpretation of Economic Fluctuations. American Economic Review, 79(5):1146–1164, December 1989.
T. Cooley and G. Hansen. The Inflation Tax in a Real Business Cycle Model. American Economic Review, 79(4):733–748, September 1989.
J.P. Danthine, J. Donaldson and R. Mehra. On some Computational Aspect of Equilibrium Business Cycle Theory. Journal of Economic Dynamics and Control, 13(3):449–470, July 1989.
X. Fairise, J.O. Hairault, F. Langot and F. Portier. Ecriture et résolution du modèle canonique des cycles réels. Cahiers ECO & MATHS 92.30, MAD, Université de Paris I, 1991.
L. Hansen and T. Sargent. Formulating and Estimating Dynamic Linear Rational Expectations Models. Journal of Economics Dynamics and Control, 2:7–46, February 1980.
G. Hansen. Indivisible Labor and the Business Cycles. Journal of Monetary Economics, 16(3):309–327, November 1985.
R. King and C. Plosser. Money, Credit and Prices in a Real Business Cycle. American Economic Review, 74(3):363–380, June 1984.
R. King, C. Plosser and S. Rebelo. Production Growth and Business Cycles: Technical Appendix. Working paper, University of Rochester, 1987. Revised May 1990.
R. King, C. Plosser and S. Rebelo. Production, Growth and Business Cycles I. Journal of Monetary Economics, 21(2/3):196–232, March–May 1988.
F. Kydland and E. Prescott. Time to Build and Aggregate Fluctuations. Econometrica, 50(6):1345–1370, November 1982.
J.P. Laffargue, P. Malgrange and T. Pujol. Une maquette trimestrielle de l’économie française avec anticipations rationnelles et concurrence monopolistique. Working paper, CEPREMAP, April 1990. Rapport de contrat pour le Commissariat Général au Plan.
R. Lucas. Understanding Business Cycles. In K. Brunner and A. Meltzer, editor, Stabilization of the Domestic and International Economy, Carnegie Rochester Conference Series on Public Policy, North-Holland, Amsterdam, 1977.
R. Lucas. Models of Business Cycles, miméo, The Yrjo Jahnson Lectures, Helsinki, 1985.
R. Rogerson. Indivisible Labor, Lotteries and Equilibrium. Journal of Monetary Economics, 21(1):3–16, January 1988.
A. Stockman. Anticipated Inflation and the Capital Stock in a Cash-in-Advance Economy. Journal of Monetary Economics, 8(2):387–393, September 1981.
S. Williamson. Financial Intermediation, Business Failures and Real Business Cycles. Journal of Political Economy, 95(6):1196–1216, December 1987.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1995 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Hairault, J., Portier, F. (1995). Cash-In-Advance Constraint and the Business Cycle. In: Henin, PY. (eds) Advances in Business Cycle Research. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-57817-5_4
Download citation
DOI: https://doi.org/10.1007/978-3-642-57817-5_4
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-63365-2
Online ISBN: 978-3-642-57817-5
eBook Packages: Springer Book Archive