| This dissertation is a small collection of my recent works on Monetary Economics, especially, on non-neutrality of money. It contains two distinct approaches--a continuous time OLG model and a macroeconomic model of price and wage competition. More concretely, the model in Chapter I of this dissertation is a straightforward combination of Sidrauski's model (1967) and Blanchard (1985), and its main result to be shown is that money is not superneutral at steady state. It will be also shown there that consumption "undershoots" its new steady state level when the monetary growth rate rises at a steady state. The second chapter of the dissertation is a simple extension of the result in Chapter I to an open macroeconomy. The main result in Chapter II is that there is a possibility of "undershooting" behavior in exchange rate when the monetary growth rate increases at a steady state. In the final chapter of the dissertation, we present a totally different approach--a macroeconomic model of Bertrand equilibrium in prices and wages, and we consider whether there is a notable macroeconomic implication of Bertrand equilibrium. One of the main results to be shown is that a Nash equilibrium of wages by workers, as the Bertrand paradox predicts, consists of some "minimum" wages that workers can choose, which are to be the "reservation" wages which give workers the same utility whatever, employment or unemployment, happens to them. Therefore, the real wages chosen by workers are rigid downwardly when unemployment happens, because by definition no workers have incentive to cut their wages. In other words, Bertrand equilibrium implies real rigidities. However, it does not lead to nominal rigidities; therefore, Bertrand equilibrium itself does not provide an alternative microfoundation for Keynesian theory. Non-neutrality of money in this framework follows when a government intervention such as unemployment allowances is introduced. If unemployment allowances are given to workers, the reservation wages can be decreasing functions of output price. Since unemployment is negatively correlated with real wages, a demand-pull inflation caused by an increase in money supply leads to an expansion of output and employment. |
