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A model of money with multilateral matching

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  • Galenianos, Manolis
  • Kircher, Philipp

Abstract

We develop a model of decentralized monetary exchange to examine the distributional effects of inflation across heterogeneous agents. The agents have private information about their productivity, preferences, or money holdings. Matching is multilateral and each seller is visited by a stochastic number of buyers. The good is allocated according to a second-price auction in money. In equilibrium, homogeneous buyers hold different amounts of money leading to price dispersion. We find the closed-form solution for the distribution of money holdings. Entry of sellers is suboptimal except at the Friedman rule. Inflation acts as a regressive tax.

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Bibliographic Info

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

Volume (Year): 55 (2008)
Issue (Month): 6 (September)
Pages: 1054-1066

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Handle: RePEc:eee:moneco:v:55:y:2008:i:6:p:1054-1066

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Web page: http://www.elsevier.com/locate/inca/505566

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Keywords: Money Private information Multilateral matching;

References

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Cited by:
  1. Venky Venkateswaran & Randall Wright, 2013. "Pledgability and Liquidity: A New Monetarist Model of Financial and Macroeconomic Activity," NBER Chapters, in: NBER Macroeconomics Annual 2013, Volume 28, pages 227-270 National Bureau of Economic Research, Inc.
  2. Randall Wright & Lixin Huang & Ping He, 2008. "Money, Banking, and Monetary Policy," 2008 Meeting Papers 347, Society for Economic Dynamics.
  3. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Methods," MPRA Paper 21486, University Library of Munich, Germany.
  4. de O. Cavalcanti, Ricardo & Puzzello, Daniela, 2009. "Stationarity without Degeneracy in a Model of Commodity Money," MPRA Paper 17125, University Library of Munich, Germany.
  5. Guido Menzio & Shouyong Shi & Hongfei Sun, 2011. "A Monetary Theory with Non-Degenerate Distributions," Working Papers tecipa-425, University of Toronto, Department of Economics.
  6. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
  7. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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