recognition to the intertemporal nature of households' saving decisions. Like traditional IS-LM, however, the optimizing version … tends to understate the value of money as an indicator for monetary policy. …

rate. Money’s role in monetary policy has been tertiary, at best. Indeed, several influential economists have suggested … that money is irrelevant for monetary policy. They suggest that central banks can control inflation by (i) controlling a … rate in order to exert greater control over longer-term rates. I offer an alternative perspective: namely, that money is …

Lagos and Wright (2005) demonstrate how the essential properties of a money-search model are preserved in an … markets under limited commitment and private information. The analysis demonstrates clearly how insurance, credit, and money … the Friedman rule. In particular, I find that the same frictions that render money essential may at the same time operate …

held, and of the amount held abroad. Most macroeconomic models that address the role of outside money as a determinant of …

We examine the role of money, allowing for three competing environments: the New Keynesian model with separable utility … and static money demand; a non-separable utility variant with habit formation; and a version with adjustment costs for … holding real balances. The last two variants imply forward-looking behavior of real money balances, as it is optimal for …

, either by themselves, or alongside a stock of outside money. In each case we provide results on the existence and …

monetary policy that sought to maintain high interest rates and to restrict the growth of the money supply. Surprisingly, given …