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More on money as a medium of exchange

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  • Timothy J. Kehoe
  • Nobuhiro Kiyotaki
  • Randall Wright

Abstract

We extend the analysis of Kiyotaki and Wright, who study an economy in which the different commodities that serve as media of exchange are determined endogenously. Kiyotaki and Wright consider only symmetric, steady-state, pure-strategy equilibria, and find that for some parameter values no such equilibria exist. We consider mixed-strategy equilibria and dynamic equilibria. We prove that a steady-state equilibrium exists for all parameter values and that the number of steady-state equilibria is generically finite. We also show, however, that there may be a continuum of dynamic equilibria. Further, some dynamic equilibria display cycles.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 140.

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Date of creation: 1991
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Publication status: Published in Economic Theory (Vol 3, Num 2, 1993, pp. 297-314)
Handle: RePEc:fip:fedmsr:140

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Keywords: Money;

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References

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  1. Kehoe, Timothy J. & Levine, David K., 1984. "Regularity in overlapping generations exchange economies," Journal of Mathematical Economics, Elsevier, vol. 13(1), pages 69-93, April.
  2. Aiyagari, S Rao & Wallace, Neil, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 901-16, October.
  3. Timothy J Kehoe & David K Levine, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Levine's Working Paper Archive 1873, David K. Levine.
  4. Nobuhiro Kiyotaki & Randall Wright, 1990. "Search for a Theory of Money," NBER Working Papers 3482, National Bureau of Economic Research, Inc.
  5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  6. Grandmont, Jean-Michel, 1985. "On Endogenous Competitive Business Cycles," Econometrica, Econometric Society, vol. 53(5), pages 995-1045, September.
  7. Aiyagari, S Rao & Wallace, Neil, 1992. "Fiat Money in the Kiyotaki-Wright Model," Economic Theory, Springer, vol. 2(4), pages 447-64, October.
  8. Jovanovic, Boyan & Rosenthal, Robert W., 1988. "Anonymous sequential games," Journal of Mathematical Economics, Elsevier, vol. 17(1), pages 77-87, February.
  9. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December.
  10. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
  11. Kehoe, Timothy J, 1985. "Multiplicity of Equilibria and Comparative Statics," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 119-47, February.
  12. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 725-37, October.
  13. Benhabib, Jess & Day, Richard H., 1982. "A characterization of erratic dynamics in, the overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 37-55, November.
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