IDEAS home Printed from https://ideas.repec.org/a/eee/dyncon/v181y2025ics0165188925001721.html

Matching friction, coordination, and monetary nonneutrality

Author

Listed:
  • Li, King King
  • Zhu, Tao

Abstract

This paper theoretically and experimentally investigates matching friction as a cause of monetary nonneutrality. We design a price-posting game in which mismatching (i.e., a player not being matched with a trading partner) is costly and can only be eliminated if players coordinate on one equilibrium from a specific subset of multiple equilibria. In the lab, subjects coordinate by certain pricing and visiting rules, and their actions appear to be consistent with such an equilibrium. A nominal shock disturbs the established coordination patterns and, in particular, causes sellers to adjust their pricing rules. The adjustment is persistent and differs at a disaggregate level in a way that the resulting nonneutrality gets along with the quantity theory (i.e., the aggregate price level is proportional to the aggregate nominal stock).

Suggested Citation

  • Li, King King & Zhu, Tao, 2025. "Matching friction, coordination, and monetary nonneutrality," Journal of Economic Dynamics and Control, Elsevier, vol. 181(C).
    • Handle: RePEc:eee:dyncon:v:181:y:2025:i:c:s0165188925001721
    DOI: 10.1016/j.jedc.2025.105206
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165188925001721
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jedc.2025.105206?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:181:y:2025:i:c:s0165188925001721. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jedc .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.