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Money and exchange in an economy with spatially differentiated agents

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  • Manolova, Petia
  • Lai Tong, Charles
  • Deissenberg, Christophe

Abstract

The impact of money supply on the real variables and on utility is an important question in monetary economics. Most previous works study this impact in representative agent economies, often under perfect foresight. With such a framework, however, the use of fiat money as a medium of exchange cannot be endogenously explained. This paper, by contrast, considers an economy where fiat money is intrinsically necessary for exchange, due to the local structure of interaction among agents. It investigates the transitory and permanent impact of local or global injections of money on the dynamics of exchanged quantities, prices, and individual welfares, and the mechanisms that explain this evolution.

Suggested Citation

  • Manolova, Petia & Lai Tong, Charles & Deissenberg, Christophe, 2003. "Money and exchange in an economy with spatially differentiated agents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 445-453.
    • Handle: RePEc:eee:phsmap:v:324:y:2003:i:1:p:445-453
    DOI: 10.1016/S0378-4371(02)01954-4
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    References listed on IDEAS

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    1. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    2. Timothy J. Kehoe & David K. Levine & Michael Woodford, 1990. "The optimum quantity of money revisited," Working Papers 404, Federal Reserve Bank of Minneapolis.
    3. Woodford, Michael, 1990. "The optimum quantity of money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 20, pages 1067-1152, Elsevier.
    4. Shi, Shouyong, 1999. "Money, capital, and redistributive effects of monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 565-590, February.
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    Cited by:

    1. Ausloos, Marcel & Pe¸kalski, Andrzej, 2007. "Model of wealth and goods dynamics in a closed market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 373(C), pages 560-568.

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