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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

Related research

Keywords: Money Private information Multilateral matching;

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References

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Citations

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Cited by:

1. He, Ping & Huang, Lixin & Wright, Randall, 2008. "Money, banking, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1013-1024, September.
   
   • Randall Wright & Lixin Huang & Ping He, 2008. "Money, Banking, and Monetary Policy," 2008 Meeting Papers 347, Society for Economic Dynamics.
2. Shouyong Shi & Hongfei Sun & Guido Menzio, 2010. "A Monetary Theory with Non-Degenerate Distributions," 2010 Meeting Papers 598, Society for Economic Dynamics.
   
   • Guido Menzio & Shouyong Shi & Hongfei Sun, 2011. "A Monetary Theory with Non-Degenerate Distributions," PIER Working Paper Archive 11-009, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
   • Guido Menzio & Shouyong Shi & Hongfei Sun, 2011. "A Monetary Theory with Non-Degenerate Distributions," Working Papers 1264, Queen's University, Department of Economics.
   • Shouyong Shi & Hongfei Sun & Guido Menzio, 2009. "Monetary Theory with Non-degenerate Distributions," 2009 Meeting Papers 172, Society for Economic Dynamics.
   • Guido Menzio & Shouyong Shi & Hongfei Sun, 2011. "A Monetary Theory with Non-Degenerate Distributions," Working Papers tecipa-425, University of Toronto, Department of Economics.
3. Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: methods," Staff Report 442, Federal Reserve Bank of Minneapolis.
   
   • Stephen Williamson & Randall Wright, 2010. "New monetarist economics: methods," Review, Federal Reserve Bank of St. Louis, issue May, pages 265-302.
   • 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.
   
   • R. O. Cavalcanti & Daniela Puzzello, 2010. "Stationarity without degeneracy in a model of commodity money," Economic Theory, Springer, vol. 43(2), pages 263-280, May.
5. 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 National Bureau of Economic Research, Inc.
   
   • Venky Venkateswaran & Randall Wright, 2013. "Pledgability and Liquidity: A New Monetarist Model of Financial and Macroeconomic Activity," NBER Working Papers 19009, National Bureau of Economic Research, Inc.
6. Williamson, Stephen D. & Wright, Randall, 2010. "New Monetarist Economics: Models," MPRA Paper 21030, University Library of Munich, Germany.
   
   • Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96 Elsevier.
   • Stephen D. Williamson & Randall Wright, 2010. "New Monetarist Economics: models," Staff Report 443, Federal Reserve Bank of Minneapolis.
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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