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A Study in Monetary Macroeconomics$
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Stefan Homburg

Print publication date: 2017

Print ISBN-13: 9780198807537

Published to Oxford Scholarship Online: August 2017

DOI: 10.1093/oso/9780198807537.001.0001

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(p.153) Chapter 8 Methods
A Study in Monetary Macroeconomics

Stefan Homburg

Oxford University Press

Chapter 8 concludes the text with methodical remarks. It defends key assumptions made in the main text and compares them, to the extent they deviate, with more conventional premises. The chapter starts with a comparison of adaptive versus rational expectations. Thereafter, it contrasts infinite planning horizons, finite planning horizons, and overlapping generations models. The third section, which is devoted to modeling money, discusses money-in-the-utility, the transaction costs approach, and more recent theories that derive money demand from a microeconomic framework. The forth section shows that assuming a highly elastic labor supply is empirically unconvincing, whereas a constant labor supply simplifies the model greatly and appears as a reasonable approximation. The final section contrasts behavioral and choice theoretic approaches to price setting.

Keywords:   adaptive expectations, intertemporal choice, modeling money, price determination

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