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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17125.
Date of creation: Mar 2009
Date of revision:
Macroeconomics with heterogeneous savings; commodity money with linear adjustments; mechanism design; auctions;
Other versions of this item:
- R. O. Cavalcanti & Daniela Puzzello, 2010. "Stationarity without degeneracy in a model of commodity money," Economic Theory, Springer, vol. 43(2), pages 263-280, May.
- C00 - Mathematical and Quantitative Methods - - General - - - General
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-11 (All new papers)
- NEP-MAC-2009-09-11 (Macroeconomics)
- NEP-MON-2009-09-11 (Monetary Economics)
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