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Dynamic Monetary Equilibrium in a Random Matching Economy

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  • Edward J. Green

    ()
    (Federal Reserve Bank of Chicago, U.S.A)

  • Ruilin Zhou

    ()
    (Research Department, Federal Reserve Bank of Chicago, U.S.A)

Abstract

This article concerns an infinite horizon economy where trade must occur pairwise, using a double auction mechanism, and where fiat money overcomes lack of double coincidence of wants. Traders are anonymous and lack market power. Goods are divisible and perishable, and are consumed at every date. Preferences are defined by utility-stream overtaking. Money is divisible and not subject to inventory constraints. The evolution of individual and economywide money holdings distributions is characterized. There is a welfare-ordered continuum of single price equilibria, reflecting indeterminacy of the price level rather than of relative prices. Copyright The Econometric Society 2002.

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Bibliographic Info

Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 70 (2002)
Issue (Month): 3 (May)
Pages: 929-969

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Handle: RePEc:ecm:emetrp:v:70:y:2002:i:3:p:929-969

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  1. Zhou, Ruilin, 1999. "Individual and Aggregate Real Balances in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1009-38, November.
  2. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  3. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
  4. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
  5. Rubinstein, Ariel & Wolinsky, Asher, 1990. "Decentralized Trading, Strategic Behaviour and the Walrasian Outcome," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 63-78, January.
  6. Itzhak Gilboa & Akihiko Matsui, 1990. "A Model of Random Matching," Discussion Papers 887, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
  8. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
  9. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  10. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Hendry, S., 1993. "Endogenous Money and Goods Production in a Search Model," UWO Department of Economics Working Papers 9316, University of Western Ontario, Department of Economics.
  12. Green, Edward J. & Zhou, Ruilin, 1998. "A Rudimentary Random-Matching Model with Divisible Money and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 252-271, August.
  13. Cass, David, 1991. "Incomplete financial markets and indeterminacy of competitive equilibrium," CEPREMAP Working Papers (Couverture Orange) 9107, CEPREMAP.
  14. Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
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