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Real indeterminacy of stationary equilibria in matching models with divisible money

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  • Kamiya, Kazuya
  • Shimizu, Takashi

Abstract

In this paper, it is shown that real indeterminacy of stationary equilibria generically arises in most matching models with perfectly divisible fiat money. In other words, the real indeterminacy follows from the condition for stationarity of money holdings, and surprisingly it has nothing to do with the other specifications, e.g., the bargaining procedures, of the models. Thus if we assume the divisibility of money in money search models, it becomes quite difficult to make accurate predictions of the effects of some policies.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 42 (2006)
Issue (Month): 4-5 (August)
Pages: 594-617

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Handle: RePEc:eee:mateco:v:42:y:2006:i:4-5:p:594-617

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  1. Kazuya Kamiya & Takashi Sato, 2004. "Equilibrium Price Dispersion in a Matching Model with Divisible Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 413-430, 05.
  2. Ruilin Zhou, 1996. "Individual and Aggregate Real Balances in a Random Matching Model," GE, Growth, Math methods, EconWPA 9612001, EconWPA, revised 23 Dec 1996.
  3. Timothy J. Kehoe & David K. Levine, 1982. "Comparitive Statics and Perfect Foresight in Infinite Horizon Economies," UCLA Economics Working Papers, UCLA Department of Economics 259, UCLA Department of Economics.
  4. Kazuya Kamiya & Takashi Shimizu, 2007. "On The Role Of Tax Subsidy Scheme In Money Search Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 575-606, 05.
  5. Mas-Colell,Andreu, 1990. "The Theory of General Economic Equilibrium," Cambridge Books, Cambridge University Press, number 9780521388702, 9.
  6. Camera, G. & Corbae, D., 1998. "Money and Price Dispersion," Working Papers, University of Iowa, Department of Economics 98-03, University of Iowa, Department of Economics.
  7. van der LAAN, Gerard, . "Simplicial approximation of unemployment equilibria," CORE Discussion Papers RP -467, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. 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.
  9. Nishimura, Kazuo & Shimomura, Koji, 2002. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 244-260, July.
  10. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(1), pages 118-41, February.
  11. Kazuya Kamiya & Takashi Shimizu, 2007. "Existence of Equilibria in Matching Models of Money: A New Technique," Economic Theory, Springer, Springer, vol. 32(3), pages 447-460, September.
  12. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers, Queen's University, Department of Economics 916, Queen's University, Department of Economics.
  13. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 66, pages 467.
  14. Akihiko Matsui & Takashi Shimizu, 2005. "A Theory Of Money And Marketplaces," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 35-59, 02.
  15. Geanakoplos, John & Mas-Colell, Andreu, 1989. "Real indeterminacy with financial assets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 22-38, February.
  16. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, Econometric Society, vol. 70(3), pages 929-969, May.
  17. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  18. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.
  19. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers, Queen's University, Department of Economics 930, Queen's University, Department of Economics.
  20. Kazuya Kamiya & Noritsugu Morishita & Takashi Shimizu, 2005. "On the existence of single-price equilibria in a matching model with divisible money and production cost," International Journal of Economic Theory, The International Society for Economic Theory, The International Society for Economic Theory, vol. 1(3), pages 219-231.
  21. Ruilin Zhou, 1999. "Does commodity money eliminate the indeterminacy of equilibria?," Working Paper Series, Federal Reserve Bank of Chicago WP-99-15, Federal Reserve Bank of Chicago.
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Citations

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Cited by:
  1. Kazuya Kamiya & So Kubota & Kayuna Nakajima, 2011. "Efficient estimation and particle filter for max-stable processes," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-792, CIRJE, Faculty of Economics, University of Tokyo.
  2. Kazuya Kamiya & Takashi Shimizu, 2007. "Existence of Equilibria in Matching Models of Money: A New Technique," Economic Theory, Springer, Springer, vol. 32(3), pages 447-460, September.
  3. Kazuya Kamiya & Takashi Shimizu, 2005. "A New Technique for Proving the Existence of Monetary Equilibria in Matching Models with Divisible Money," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-037, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  4. Kazuya Kamiya & Takashi Shimizu, 2009. "Stationary Monetary Equilibria with Strictly Increasing Value Functions and Non-Discrete Money Holdings Distributions: An Indeterminacy Result," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-615, CIRJE, Faculty of Economics, University of Tokyo.
  5. Kamiya, Kazuya & Talman, Dolf, 2009. "Matching models with a conservation law: The existence and global structure of the set of stationary equilibria," Journal of Mathematical Economics, Elsevier, vol. 45(5-6), pages 397-413, May.
  6. Kazuya Kamiya & Takashi Shimizu, 2010. "Hysteresis in Dynamic General Equilibrium Models with Cash-in-Advance Constraints," CARF F-Series, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo CARF-F-232, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  7. Li, Yiting & Matsui, Akihiko, 2009. "A theory of international currency: Competition and discipline," Journal of the Japanese and International Economies, Elsevier, vol. 23(4), pages 407-426, December.

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