We 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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
17125.
Find related papers by JEL classification: C00 - Mathematical and Quantitative Methods - - General - - - General E00 - Macroeconomics and Monetary Economics - - General - - - General
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