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Stochastic Tastes and Money in a Neo-Keynesian Economy

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  • Klaus Rainer Schenk-Hoppé

Abstract

This paper studies a monetary economy with heterogenous agents in which trade takes place in a centralized market. Each agent is a potential producer and consumer of a service (or perishable good) but has stochastic preferences that determines his taste for the good in each period in time. Money serves as a medium of exchange as well as a store of value. We prove existence of stationary fix-price equilibria with exogenously given quantity of money in which transactions can take place at non-Walrasian prices. Precautionary savings, under- and oversupply, dynamics on money holdings, and the effects of changes in the quantity of money are discussed.

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Bibliographic Info

Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 088.

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Handle: RePEc:zur:iewwpx:088

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Keywords: Microeconomic Models of Money; Stochastic Preferences; Fix-Price Equilibria; Rationing; Dynamics of Money Distributions;

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  1. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report, Federal Reserve Bank of Minneapolis 123, Federal Reserve Bank of Minneapolis.
  3. Wallace, Neil, 1997. "Short-Run and Long-Run Effects of Changes in Money in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1293-1307, December.
  4. Berentsen, Aleksander, 2000. "Money Inventories in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 32(2), pages 168-78, May.
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