A Rudimentary Random-Matching Model with Divisible Money and Prices
We consider a version of Kiyotaki and Wright's monetary search model in which agents can hold arbitrary amounts of divisible money. A continuum of stationary equilibria, indexed by the aggregate real-money stock, exist with all trading occurring at a single price. There is always a maximum level of the real money stock consistent with existence of such an equilibrium. In the limit as trading becomes faster relative to discounting, any real money stock becomes feasible in such an equilibrium. In contrast to the original Kiyotaki-Wright model, higher equilibrium real money stocks unambiguously correspond to higher welfare.
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- Rao Aiyagari, S. & Wallace, Neil & Wright, Randall, 1996.
"Coexistence of money and interest-bearing securities,"
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- Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
- William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
- Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February. Full references (including those not matched with items on IDEAS)
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