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The essentiality of money in environments with centralized trade

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  • Araujo, Luis
  • Camargo, Braz
  • Minetti, Raoul
  • Puzzello, Daniela

Abstract

Lagos and Wright (2005) introduced an influential model of monetary exchange in which trade alternates between centralized and decentralized markets and money is essential. A limitation of their model and of the literature that follows is that they do not provide a microfoundation for the process of exchange in the centralized market. In this paper, we show that how one models exchange in the centralized market matters for the essentiality of money by describing the centralized market as a strategic market game and studying conditions under which money is essential.

Suggested Citation

  • Araujo, Luis & Camargo, Braz & Minetti, Raoul & Puzzello, Daniela, 2012. "The essentiality of money in environments with centralized trade," Journal of Monetary Economics, Elsevier, vol. 59(7), pages 612-621.
  • Handle: RePEc:eee:moneco:v:59:y:2012:i:7:p:612-621
    DOI: 10.1016/j.jmoneco.2012.10.007
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    5. 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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    12. Dubey, Pradeep & Shubik, Martin, 1978. "A theory of money and financial institutions. 28. The non-cooperative equilibria of a closed trading economy with market supply and bidding strategies," Journal of Economic Theory, Elsevier, vol. 17(1), pages 1-20, February.
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    Cited by:

    1. Guilherme Carmona, 2021. "On the optimality of monetary trading," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(3), pages 1121-1160, April.
    2. Bonetto, Federico & Iacopetta, Maurizio, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," Journal of Mathematical Economics, Elsevier, vol. 84(C), pages 207-224.
    3. John Duffy & Daniela Puzzello, 2019. "The Friedman Rule in the Laboratory," 2019 Meeting Papers 541, Society for Economic Dynamics.
    4. Athanasios Geromichalos & Jiwon Lee & Seungduck Lee & Keita Oikawa, 2016. "Over-the-counter trade and the value of assets as collateral," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 443-475, August.
    5. Jiang, Janet Hua & Puzzello, Daniela & Zhang, Cathy, 2023. "Inflation, Output, and Welfare in the Laboratory," European Economic Review, Elsevier, vol. 152(C).
    6. Jonathan Chiu & Tsz-Nga Wong, 2015. "On the Essentiality of E-Money," Staff Working Papers 15-43, Bank of Canada.
    7. Federico Bonetto & Maurizio Iacopetta, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," Post-Print hal-03403584, HAL.
    8. Chao Gu & Fabrizio Mattesini & Randall Wright, 2016. "Money and Credit Redux," Econometrica, Econometric Society, vol. 84, pages 1-32, January.
    9. Araujo, Luis & Camargo, Braz, 2015. "Limited monitoring and the essentiality of money," Journal of Mathematical Economics, Elsevier, vol. 58(C), pages 32-37.
    10. Anbarci, Nejat & Dutu, Richard & Feltovich, Nick, 2015. "Inflation tax in the lab: a theoretical and experimental study of competitive search equilibrium with inflation," Journal of Economic Dynamics and Control, Elsevier, vol. 61(C), pages 17-33.
    11. Federico Bonetto & Maurizio Iacopetta, 2019. "A dynamic analysis of nash equilibria in search models with fiat money," SciencePo Working papers Main hal-03403584, HAL.
    12. repec:hal:spmain:info:hdl:2441/48v4b2d60n9bipfp9hcmbgtucs is not listed on IDEAS
    13. Federico Bonetto & Maurizio Iacopetta, 2019. "A Dynamic Analysis of Nash Equilibria in Search Models with Fiat Money ," Post-Print halshs-03515530, HAL.
    14. Jonathan Chiu & Tsz-Nga Wong, 2015. "On the Essentiality of E-Money," Staff Working Papers 15-43, Bank of Canada.
    15. John Duffy & Daniela Puzzello, 2011. "Gift Exchange versus Monetary Exchange: Theory and Evidence," Working Paper 449, Department of Economics, University of Pittsburgh, revised Sep 2013.

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