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Commodity money with frequent search

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  • Oberfield, Ezra
  • Trachter, Nicholas

Abstract

A prominent feature of the Kiyotaki–Wright model of commodity money is multiplicity of dynamic equilibria. We show that the extent of multiplicity hinges on the frequency of search. Holding fixed the average number of meetings over time, we vary search frequency by altering the interval between search opportunities. To isolate the role of search frequency, we focus on symmetric equilibria in a symmetric environment. For each frequency we characterize the entire set of payoffs, strategies, and dynamic paths consistent with equilibrium. Indexed by these features, as search frequency increases the set of equilibria converges uniformly to a unique limiting equilibrium.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 6 ()
Pages: 2332-2356

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:6:p:2332-2356

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Commodity money; Search; Multiple equilibria; Sunspots;

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  1. Aiyagari, S Rao & Wallace, Neil, 1992. "Fiat Money in the Kiyotaki-Wright Model," Economic Theory, Springer, vol. 2(4), pages 447-64, October.
  2. Renero, Juan-Manuel, 1999. "Does and Should a Commodity Medium of Exchange Have Relatively Low Storage Costs?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 251-64, May.
  3. Benhabib, Jess & Farmer, Roger E.A., 1999. "Indeterminacy and sunspots in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 6, pages 387-448 Elsevier.
  4. 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.
  5. Kehoe, Timothy J & Kiyotaki, Nobuhiro & Wright, Randall, 1993. "More on Money as a Medium of Exchange," Economic Theory, Springer, vol. 3(2), pages 297-314, April.
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