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Equilibrium using credit or money with indivisible goods

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  • Han, Han
  • Julien, Benoît
  • Petursdottir, Asgerdur
  • Wang, Liang

Abstract

This note studies the trade of indivisible goods using credit or money in a frictional market. We show how indivisibility matters for monetary equilibrium under different assumptions about price determination. Bargaining generates a price and allocation that are independent of the nominal interest or inflation rate over some range. This is not the case with price posting and directed search. In either case, we provide conditions (the nominal rate cannot be too high) under which stationary monetary equilibrium exists, and we show it is unique or generically unique.

Suggested Citation

  • Han, Han & Julien, Benoît & Petursdottir, Asgerdur & Wang, Liang, 2016. "Equilibrium using credit or money with indivisible goods," Journal of Economic Theory, Elsevier, vol. 166(C), pages 152-163.
  • Handle: RePEc:eee:jetheo:v:166:y:2016:i:c:p:152-163
    DOI: 10.1016/j.jet.2016.08.007
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    References listed on IDEAS

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    5. Jean, Kasie & Rabinovich, Stanislav & Wright, Randall, 2010. "On the multiplicity of monetary equilibria: Green-Zhou meets Lagos-Wright," Journal of Economic Theory, Elsevier, vol. 145(1), pages 392-401, January.
    6. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
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    21. Lucy Qian Liu & Liang Wang & Randall Wright, 2015. "Costly Credit and Sticky Prices," Working Papers 201505, University of Hawaii at Manoa, Department of Economics.
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    Cited by:

    1. Lorenzo Carbonari & Fabrizio Mattesini & Robert J. Waldmann, 2022. "Inflation and Welfare in a Competitive Search Equilibrium with Asymmetric Information," Working Paper series 22-01, Rimini Centre for Economic Analysis.
    2. Han, Han & Julien, Benoît & Petursdottir, Asgerdur & Wang, Liang, 2019. "Asset liquidity and indivisibility," European Economic Review, Elsevier, vol. 119(C), pages 236-250.
    3. Han Han & Benoit Julien & Asgerdur Petursdottir & Liang Wang, 2017. "Asset Pricing Equilibria with Indivisible Goods," Working Papers 201705, University of Hawaii at Manoa, Department of Economics.
    4. Baughman, Garth & Rabinovich, Stanislav, 2021. "Capacity choice, monetary trade, and the cost of inflation," European Economic Review, Elsevier, vol. 134(C).
    5. Kamiya, Kazuya & Kobayashi, Hajime & Shichijo, Tatsuhiro & Shimizu, Takashi, 2021. "On the monetary exchange with multiple equilibrium money holdings distributions: An experimental approach," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 206-232.

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    More about this item

    Keywords

    Bargaining; Competitive search; Indivisibility; Uniqueness;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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