Menu Expand

A Two-Agent Model of Inflation

Cite JOURNAL ARTICLE

Style

Browne, F., Cronin, D. A Two-Agent Model of Inflation. Credit and Capital Markets – Kredit und Kapital, 51(3), 367-388. https://doi.org/10.3790/ccm.51.3.367
Browne, Frank and Cronin, David "A Two-Agent Model of Inflation" Credit and Capital Markets – Kredit und Kapital 51.3, 2018, 367-388. https://doi.org/10.3790/ccm.51.3.367
Browne, Frank/Cronin, David (2018): A Two-Agent Model of Inflation, in: Credit and Capital Markets – Kredit und Kapital, vol. 51, iss. 3, 367-388, [online] https://doi.org/10.3790/ccm.51.3.367

Format

A Two-Agent Model of Inflation

Browne, Frank | Cronin, David

Credit and Capital Markets – Kredit und Kapital, Vol. 51 (2018), Iss. 3 : pp. 367–388

Additional Information

Article Details

Author Details

Frank Browne, Trinity College Dublin, College Green, Dublin 2

David Cronin, Central Bank of Ireland, P.O. Box 559, Dublin 1, Ireland

Abstract

Models of inflation usually have monetary policy affecting the economy through either an interest rate channel or a monetary/credit quantity channel but not through both simultaneously. It is argued here that policy is transmitted via two distinct types of agents – those that are and that are not liquidity-constrained. The implication is that both interest rate and monetary channels must be seen as complementary, joint indicators of inflation and must both be incorporated into models of inflation. A formal representation of price level determination and behaviour in this two-agent framework is provided and evaluated econometrically using US data.

Table of Contents