THE AVAILABILITY DOCTRINE

This paper develops a general equilibrium model in which monetary disturbances have effects reminiscent of Roosa's classic description of the availability doctrine. The model is a marriage of the modern credit rationing literature and the recent sluggish cash flow models of monetary transmission. Both elements are crucial. The credit rationing aspect leads to a focus upon the quantity or availability of credit. However, the rationing model in and of itself is a real model, and there is no reason for fluctuations in the nominal quantity of fiat money to have any effect on the availability of real credit. This is where the sluggish cash flow assumption enters into the analysis. Under this assumption, changes in the nominal supply of fiat money do affect the real supply of credit because a subset of the economy absorbs a disproportionate share of the monetary injection.