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A Matching Model with Bounded Holdings of Indivisible Money

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  • Taber, Alexander
  • Wallace, Neil

Abstract

Recent versions of pairwise random matching models of money with divisible and perishable goods are amended to allow individuals to hold more than one unit of an indivisible asset. The asset resembles a fiat asset, except that nominal holdings of it yield a small amount of utility. There is a general upper bound on the number of units of the asset that individuals can hold. A steady state with trade is shown to exist. The model is applied to study numerically the effect on welfare of the degree to which the asset is divisible. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 40 (1999)
Issue (Month): 4 (November)
Pages: 961-84

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Handle: RePEc:ier:iecrev:v:40:y:1999:i:4:p:961-84

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Cited by:
  1. Miquel Faig, 2001. "A search theory of money and commerce with Neoclassical production," Economics Working Papers 567, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Tao Zhu & Neil Wallace, 2004. "Float on a Note," 2004 Meeting Papers 342, Society for Economic Dynamics.
  3. Berentsen, Aleksander & Rocheteau, Guillaume, 2002. "On the efficiency of monetary exchange: how divisibility of money matters," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1621-1649, November.
  4. Ricardo Lagos & Randall Wright, 2002. "A unified framework for monetary theory and policy analysis," Working Paper 0211, Federal Reserve Bank of Cleveland.
  5. Camera, Gabriele, 2001. "Dirty money," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 377-415, April.
  6. Rupert, Peter & Schindler, Martin & Wright, Randall, 2001. "Generalized search-theoretic models of monetary exchange," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 605-622, December.
  7. Kim, Young Sik & Lee, Manjong, 2010. "A model of debit card as a means of payment," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1359-1368, August.
  8. Aleksander Berentsen & Guillaume Rocheteau, 2002. "Money in Bilateral Trade," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 489-506, December.
  9. Tsunao Okumura, 2005. "Wealth as a Signal in the Search Model of Money," Discussion Papers 1401, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Wallace, Neil & Zhu, Tao, 2007. "Float on a note," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 229-246, March.
  11. Berentsen, Aleksander, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," MPRA Paper 37319, University Library of Munich, Germany.
  12. Zhu, Tao, 2003. "Existence of a monetary steady state in a matching model: indivisible money," Journal of Economic Theory, Elsevier, vol. 112(2), pages 307-324, October.
  13. Manjong Lee & Neil Wallace, 2006. "Optimal divisibility when money is costly to produce," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 541-556, July.
  14. Ahiabu, Stephen, 2006. "Inflation and the underground economy," MPRA Paper 763, University Library of Munich, Germany, revised Oct 2006.
  15. Zhu, Tao, 2002. "Existence of Monetary Steady States in a Matching Model: Indivisible Money," Working Papers 5-02-1, Pennsylvania State University, Department of Economics.
  16. Ricardo de O. Cavalcanti & Paulo K. Monteiro, 2007. "On the Optimum Distribution of Money," 2007 Meeting Papers 771, Society for Economic Dynamics.

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