Stationarity without degeneracy in a model of commodity money
AbstractWe develop a model of macroeconomic heterogeneity inspired by the Kiyotaki-Wright (1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static op- timization problem. Savings decisions in the benchmark case are re- markably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 43 (2010)
Issue (Month): 2 (May)
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- de O. Cavalcanti, Ricardo & Puzzello, Daniela, 2009. "Stationarity without Degeneracy in a Model of Commodity Money," MPRA Paper 17125, University Library of Munich, Germany.
- C00 - Mathematical and Quantitative Methods - - General - - - General
- E00 - Macroeconomics and Monetary Economics - - General - - - General
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