MONETARY POLICIES IN AN INTERTEMPORAL MACROECONOMIC MODEL WITH IMPERFECT COMPETITION

A two-period model of a closed economy is presented. Output is produced and sold by imperfectly competitive firms whose production technology may exhibit increasing returns to scale. Trade unions determine the wage rate in each period. Consumers maximize an intertemporal utility function and possess perfect foresight. The effects of changes in the, money supply are analyzed; an expansionary monetary policy will, in general, raise output, employment and welfare, although the magnitude of the impact depends on whether the policy is permanent or temporary.