Individual and Aggregate Real Balances in a Random Matching Model
AbstractThis paper investigates the existence and properties of stationary single-price equilibrium in a monetary random matching model where agents can hold an arbitrary amount of divisible money, and where production is costly. For some parameter values of the model, there exists a continuum of single-price equilibria indexed by the aggregate real-money balance. At such an equilibrium, an agent accumulates money only up to a certain point where his marginal value of holding money drops below the cost of production. Different upper bounds on money holdings imply different distributions of money holdings. The coexistence of multiple equilibria with distinct upper bounds but identical aggregate real-money balances suggests the importance of money distribution in determining trade velocity, production and welfare.
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Bibliographic InfoPaper provided by EconWPA in its series GE, Growth, Math methods with number 9612001.
Date of creation: 23 Dec 1996
Date of revision: 23 Dec 1996
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Other versions of this item:
- Zhou, Ruilin, 1999. "Individual and Aggregate Real Balances in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1009-38, November.
- Ruilin Zhou, 1996. "Individual and aggregate real balances in a random matching model," Staff Report 222, Federal Reserve Bank of Minneapolis.
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
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- Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, 08.
- Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
- Edward J. Green & Ruilin Zhou, .
"A Rudimentary Model of Search with Divisible Money and Prices,"
Penn CARESS Working Papers
2772f94306e08ef7292945588, Penn Economics Department.
- Edward J. Green & Ruilin Zhou, . ""A Rudimentary Model of Search with Divisible Money and Prices''," CARESS Working Papres 95-17, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
- Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
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