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A Search and Bargaining Model of Non-degenerate Distributions of Money Holdings

Author

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  • Kazuya Kamiya

    (Research Institute for Economics and Business Administration(RIEB), Kobe University, JAPAN)

  • So Kubota

    (Faculty of Political Science and Economics, Waseda University)

Abstract

We study a standard search and bargaining model of money, where goods are traded only in decentralized markets and distributions of money holdings are non-degenerate in equilibria. We assume fixed costs in each seller's production, which allows an analytical characterization of a tractable equilibrium. Each Nash bargaining solution satisfies pay-all property, where the buyer pays the whole amount of cash as a corner solution, and the seller produces goods as the interior solution. In the stationary equilibrium, the aggregate variables, such as total production and the number of matchings, are expressed by given parameters, i.e., determinate. On the other hand, individual-level variables are indeterminate. Distributional monetary policies are e ective in both the short-run and the long-run.

Suggested Citation

  • Kazuya Kamiya & So Kubota, 2021. "A Search and Bargaining Model of Non-degenerate Distributions of Money Holdings," Discussion Paper Series DP2021-11, Research Institute for Economics & Business Administration, Kobe University, revised Aug 2021.
    • Handle: RePEc:kob:dpaper:dp2021-11
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2021-11.pdf
    File Function: Revised version, 2021
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