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The search-theoretic approach to monetary economics: a primer

  • Peter Rupert
  • Martin Schindler
  • Andrei Shevchenko
  • Randall Wright

The authors present simple versions of models used in the search-theoretic approach to monetary economics. They discuss results on the existence of monetary equilibria, the potential for multiple equilibria, and welfare. Using bilateral bargaining theory, they consider models where prices are fixed as well as those where prices are determined endogenously. After describing the frictions necessary to construct a model where money has an essential role, they conclude by reviewing many extensions and applications in the related literature

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Article provided by Federal Reserve Bank of Cleveland in its journal Economic Review.

Volume (Year): (2000)
Issue (Month): Q IV ()
Pages: 10-28

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Handle: RePEc:fip:fedcer:y:2000:i:qiv:p:10-28
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  1. Soller, E.V. & Waller, C., 1997. "A Search Theoretic Model of Legal and Illegal Currency," Papers 97-003, Indiana - Center for Econometric Model Research.
  2. Craig, B. & Waller, C.J., 1999. "Currency Portfolios and Nominal Exchange Rates in a Dual Currency Search Economy," Papers 9916, London School of Economics - Centre for Labour Economics.
  3. Ricardo de O. Cavalcanti & Andres Erosa & Ted Temzelides, 1999. "Private Money and Reserve Management in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 929-945, October.
  4. Aleksander Berentsen, . "Time-Consistent Private Supplie of Outside Paper Money," IEW - Working Papers 156, Institute for Empirical Research in Economics - University of Zurich.
  5. Diamond, Peter A, 1984. "Money in Search Equilibrium," Econometrica, Econometric Society, vol. 52(1), pages 1-20, January.
  6. Jones, Robert A, 1976. "The Origin and Development of Media of Exchange," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 757-75, August.
  7. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 241-256, March.
  8. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "Inside and outside money as alternative media of exchange," Proceedings, Federal Reserve Bank of Cleveland, pages 443-468.
  9. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  10. Cuadras-Morato, Xavier, 1994. "Commodity Money in the Presence of Goods of Heterogeneous Quality," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 4(4), pages 579-91, May.
  11. Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
  12. Timothy J. Kehoe & Nobuhiro Kiyotaki & Randall Wright, 1991. "More on money as a medium of exchange," Staff Report 140, Federal Reserve Bank of Minneapolis.
  13. Peter Diamond, 1990. "Pairwise Credit in Search Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 285-319.
  14. Diamond, Peter & Yellin, Joel, 1985. "The Distribution of Inventory Holdings in a Pure Exchange Barter Search Economy," Econometrica, Econometric Society, vol. 53(2), pages 409-32, March.
  15. Basci, Erdem, 1999. "Learning by imitation," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1569-1585, September.
  16. Jin, Yi & Temzelides, Ted, 1998. "On the Local Interaction of Money and Credit," Working Papers 99-05, University of Iowa, Department of Economics.
  17. Aleksander Berentsen, 1996. "Money Inventories In Search Equilibrium," Diskussionsschriften dp9603, Universitaet Bern, Departement Volkswirtschaft.
  18. Edward J. Green & Warren E. Weber, 1996. "Will the new $100 bill decrease counterfeiting?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-10.
  19. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2001. "Cigarette Money," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 117-142, July.
  20. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Camera, G. & Corbae, D., 1998. "Money and Price Dispersion," Working Papers 98-03, University of Iowa, Department of Economics.
  22. Melvyn Cole & Randall Wright, . "A Dynamic Equilibrium Model of Search, Bargaining, and Money," CARESS Working Papres 97-9, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  23. Li, Yiting & Wright, Randall, 1998. "Government Transaction Policy, Media of Exchange, and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 290-313, August.
  24. Aiyagari, S Rao & Wallace, Neil, 1992. "Fiat Money in the Kiyotaki-Wright Model," Economic Theory, Society for the Advancement of Economic Theory (SAET), vol. 2(4), pages 447-64, October.
  25. Edward J. Green & Ruilin Zhou, . "A Rudimentary Model of Search with Divisible Money and Prices," Penn CARESS Working Papers 2772f94306e08ef7292945588, Penn Economics Department.
  26. Li, Victor E, 1997. "The Efficiency of Monetary Exchange in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 61-72, February.
  27. Dean Corbae & Ted Temzelides & Randall Wright, 2002. "Matching and Money," American Economic Review, American Economic Association, vol. 92(2), pages 67-71, May.
  28. Aiyagari, S. Rao & Wallace, Neil, 1997. "Government Transaction Policy, the Medium of Exchange, and Welfare," Journal of Economic Theory, Elsevier, vol. 74(1), pages 1-18, May.
  29. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  30. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
  31. Brett Katzman & John Kennan & Neil Wallace, 1999. "Optimal monetary impulse-response functions in a matching model," Working Papers 595, Federal Reserve Bank of Minneapolis.
  32. Merwan Engineer & Shouyong Shi, 2001. "Bargains, Barter and Money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 188-209, January.
  33. Klaus Kultti, 1996. "A monetary economy with counterfeiting," Journal of Economics, Springer, vol. 63(2), pages 175-186, June.
  34. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
  35. Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," MPRA Paper 68582, University Library of Munich, Germany.
  36. Burdett, Kenneth, et al, 1995. "Buyers and Sellers: Should I Stay or Should I Go?," American Economic Review, American Economic Association, vol. 85(2), pages 281-86, May.
  37. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
  38. Jafarey, Saqib & Masters, Adrian, 2003. " Output, Prices, and the Velocity of Money in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(6), pages 871-88, December.
  39. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
  40. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 131-159, June.
  41. Engineer, Merwan & Shouying Shi, 1998. "Asymmetry, imperfectly transferable utility, and the role of fiat money in improving terms of trade," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 153-183, February.
  42. Li, Victor E, 1995. "The Optimal Taxation of Fiat Money in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 927-42, November.
  43. Li, Yiting, 1995. "Commodity money under private information," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 573-592, December.
  44. Duffy, John, 2001. "Learning to speculate: Experiments with artificial and real agents," Journal of Economic Dynamics and Control, Elsevier, vol. 25(3-4), pages 295-319, March.
  45. Jack Ochs & John Duffy, 1999. "Emergence of Money as a Medium of Exchange: An Experimental Study," American Economic Review, American Economic Association, vol. 89(4), pages 847-877, September.
  46. Iwai, Katsuhito, 1996. "The bootstrap theory of money: A search-theoretic foundation of monetary economics," Structural Change and Economic Dynamics, Elsevier, vol. 7(4), pages 451-477, December.
  47. Johri, Alok, 1999. "Search, Money, and Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 439-54, May.
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