Money and the gain from enduring relationships in the turnpike model
AbstractThis paper presents a stochastic version of Townsend's turnpike model in which the aggregate endowment is distributed randomly between two sets of agents and in which agents of each type are allowed to remain at a trading post for multiple periods. Agents use money as a means of exchange when they meet as strangers but use private securities when they remain paired at the same trading post. Both welfare and the income velocity of money increase monotonically with the length of the trading session.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Richmond in its series Working Paper with number 94-07.
Date of creation: 1994
Date of revision:
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