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Economic Quarterly

Spring 2005

Limited Participation and the Neutrality of Money

Stephen D. Williamson

An exploration of limited participation models reviews the literature and plots some new directions of research in this area. I constructed and modified a baseline cash-in-advance model to illustrate the main ideas. The model shows how limited participation can explain the liquidity effect and nonneutralities of money arising from the distribution effects of monetary policy actions.

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