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Some Benefits of Cyclical Monetary Policy


In this paper, we present a simple random-matching model in which different seasons translate into different propensities to consume and produce. We find that the cyclical creation and destruction of money is beneficial for welfare under a wide variety of circumstances. Our model of seasons can be interpreted as providing support for the creation of the Federal Reserve System, with its mandate of supplying an elastic currency for the nation.


Suggested citation: Cavalcanti, Ricardo, and Ed Nosal, 2005. "Some Benefits of Cyclical Monetary Policy," Federal Reserve Bank of Cleveland, Working Paper no. 05-11.

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