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The Distribution of Money and Prices in an Equilibrium with Lotteries

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  • Aleksander Berentsen
  • Gabriele Camera
  • Christopher Waller

Abstract

We construct a tractable model of divisible money and equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible 'tokens'. By studying a simple trading pattern, we can generate monetary distributions that match those observed in numerically simulated economies with fully divisible money and price heterogeneity.

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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 174.

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Handle: RePEc:zur:iewwpx:174

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Keywords: Money; Search; Lotteries; Price Dispersion; Wealth Distribution;

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References

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  1. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  2. 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.
  3. Ruilin Zhou, 1996. "Individual and aggregate real balances in a random matching model," Staff Report 222, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Andre C. Silva, 2011. "Individual and Aggregate Money Demands," FEUNL Working Paper Series wp557, Universidade Nova de Lisboa, Faculdade de Economia.
  2. Berentsen, Aleksander & Camera, Gabriele & Waller, Christopher, 2007. "Money, credit and banking," Journal of Economic Theory, Elsevier, vol. 135(1), pages 171-195, July.
  3. Martin, Antoine & Monnet, Cyril, 2011. "Monetary Policy Implementation Frameworks: A Comparative Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S1), pages 145-189, April.
  4. Aleksander Berentsen & Gabriele Camera & C hristopher W aller, 2005. "The Distribution Of Money Balances And The Nonneutrality Of Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(2), pages 465-487, 05.
  5. Lotz, Sebastien, 2004. "Introducing a new currency: Government policy and prices," European Economic Review, Elsevier, vol. 48(5), pages 959-982, October.
  6. Kim, Young Sik & Lee, Manjong, 2010. "A model of debit card as a means of payment," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1359-1368, August.
  7. Kazuya Kamiya & Takashi Shimizu, 2007. "Existence of Equilibria in Matching Models of Money: A New Technique," Economic Theory, Springer, vol. 32(3), pages 447-460, September.
  8. Lee, Manjong, 2010. "Carrying cost of money and real effects of denomination structure," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 326-337, March.
  9. Shouyong Shi, 2006. "A Microfoundation of Monetary Economics," Working Papers tecipa-211, University of Toronto, Department of Economics.
  10. Aliprantis, C.D. & Camera, G. & Ruscitti, F., 2009. "Monetary equilibrium and the differentiability of the value function," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 454-462, February.

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