*Assistant Professor, University of Notre Dame. I thank Jeff Bergstrand, Tom Bundt, George Catsiapis, Andy Criswell, Terri Gollinger, Gene Gruver, George Hendrikse, Ed Trubac, and especially Norm Miller, Richard Sweeney and two anonymous referees for valuable comments. The research support of the Business Partners Fund and the Center for Research in Banking at the University of Notre Dame is gratefully acknowledged.
MONEY SUPPLY VARIABILITY IN A MACRO MODEL OF MONOPOLISTIC COMPETITION
Article first published online: 28 SEP 2007
Volume 26, Issue 4, pages 661–685, October 1988
How to Cite
Balvers, R. J. (1988), MONEY SUPPLY VARIABILITY IN A MACRO MODEL OF MONOPOLISTIC COMPETITION. Economic Inquiry, 26: 661–685. doi: 10.1111/j.1465-7295.1988.tb01522.x
- Issue published online: 28 SEP 2007
- Article first published online: 28 SEP 2007
The effects of changes in money supply variability are examined for a macro model of monopolistic competition. Increases in money supply variability raise demand uncertainty causing individual firms to produce more for inventory. In addition, expected profits decrease, inducing a number of firms to leave the economy. Aggregate income then falls in spite of an increase in firm-level production. The result on aggregate income is standard, but the results on inventories and the number of firms in the economy distinguish this monopolistic macro model empirically from conventional macro models when changes in money supply variability occur.