Money and Prices: A Model of Search and Bargaining
AbstractThis paper makes commodities divisible and incorporates bargaining into the search-theoretic model of money to determine the purchasing power of money (or price). It is shown that two monetary equilibria always coexist where flat money is universally accepted. The two equilibria differ in price, output, welfare and the velocity of money. Sunspot monetary equilibria exist in which money is universally accepted in all states of the economy. Multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 916.
Length: 53 pages
Date of creation: Jan 1995
Date of revision:
Other versions of this item:
- Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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