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The instability of some non-full-support steady states in a random matching model of money

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  • Huang, Pidong
  • Igarashi, Yoske

Abstract

Zhu (2003) shows existence of full-support monetary steady states with strictly concave value functions in a random matching model with individual money holdings in {0,1,2,…,B} for a general B. He also shows that corresponding to each such steady state is an l-replica steady state for each l∈N: money is traded in bundles of l units, the support is {0,l,2l,…,lB}, and the value function is a step-function with jumps at points of the support. We show that such l-replicas are unstable if the underlying full-support steady state is a pure strategy steady state and if the support of the initial distribution is not {0,l,2l,…,lB}.

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  • Huang, Pidong & Igarashi, Yoske, 2014. "The instability of some non-full-support steady states in a random matching model of money," Journal of Mathematical Economics, Elsevier, vol. 55(C), pages 177-185.
    • Handle: RePEc:eee:mateco:v:55:y:2014:i:c:p:177-185
    DOI: 10.1016/j.jmateco.2014.09.005
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    References listed on IDEAS

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    1. Huang, Pidong & Igarashi, Yoske, 2015. "Trejos–Wright with a 2-unit bound: Existence and stability of monetary steady states," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 55-62.
    2. Deviatov Alexei, 2006. "Money Creation in a Random Matching Model," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-20, December.
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    Cited by:

    1. Pidong Huang, 2015. "Robustness of Stability to Cost of Carrying Money in a Matching Model of Money," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 95-114, May.
    2. Huang, Pidong & Igarashi, Yoske, 2015. "Trejos–Wright with a 2-unit bound: Existence and stability of monetary steady states," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 55-62.

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