Money Inventories In Search Equilibrium
AbstractThe paper relaxes the one unit storage capacity imposed in the basic search-theoretic model of fiat money with indivisible real commodities and indivisible money. Agents can accumulate as much money as they want. It characterizes the stationary distributions of money and shows that for reasonable parameter values (e.g. production cost, discounting, degree of specialization) a monetary equilibrium exists. There are multiple stationary distributions of a given amount of money, which differ in their welfare levels. Thus, a redistribution of money affects real economic variables in this model. The monetary equilibrium reveals two essential features of money. First, the marginal expected utility of money decreases. Second, there exists an endogenous upper bound on the money holdings: agents willingly produce and sell for money up to this bound and refuse to do so if their money holdings exceed this bound.
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Bibliographic InfoPaper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp9603.
Date of creation: Mar 1996
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- Aleksander Berentsen, 2002.
"On the Distribution of Money Holdings in a Random-Matching Model,"
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Springer, vol. 54(2), pages 211-248, October.
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"On the efficiency of monetary exchange: how divisibility of money matters,"
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Elsevier, vol. 49(8), pages 1621-1649, November.
- Aleksander Berentsen & Guillaume Rocheteau, . "On the Efficiency of Monetary Exchange:How Divisibility of Money Matters," IEW - Working Papers 101, Institute for Empirical Research in Economics - University of Zurich.
- Klaus Rainer Schenk-Hoppé, . "Stochastic Tastes and Money in a Neo-Keynesian Economy," IEW - Working Papers 088, Institute for Empirical Research in Economics - University of Zurich.
- Aleksander Berentsen & Guillaume Rocheteau, 2002. "Money in Bilateral Trade," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 489-506, December.
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