When it is costly for a store (i.e., clearinghouse) to mediate trade, a speculative demand for money may arise. Trading money to another agent for a good, rather than trading good for good through a store, allows the money holder to obtain the good while avoiding the fee the store must charge to cover its costs. We show that when the mediation market is contestable, there are conditions in whic...

The paper examines the causal nexus between financial development and economic growth in India in a multivariate VAR model. The empirical analysis is based on cointegration and causality test. The cointegration test finds the presence of long run equilibrium relationship between financial development and economic growth. The Granger causality test finds the existence of bidirectional causality ...

This paper examines the relation between money and housing variables in the euro area and in the US. Our empirical model is based on a standard money demand relation which is augmented by housing market variables. In doing so, co-integrated money demand relationships can be established for both the euro area and the US. Furthermore, we find evidence for asset inflation channels, that is, liquid...

This paper examines the effectiveness of fiscal policy in a general equilibrium macromodel with transactions money and an oligopolistic product market. The results suggest that although money may be neutral and play no direct role as policy instrument, its indirect impact on the effectiveness of fiscal policy can be quite substantial. In particular, (i) fiscal policy becomes ineffective as the ...