Money Inventories in Search Equilibrium
The paper relaxes the one unit storage capacity imposed in the basic search-theoretic model of fiat money with indivisible real commodities and indivisible money. Agents can accumulate as much money as they want. It characterizes the stationary distributions of money and shows that for reasonable parameter values (e.g. production cost, discounting, degree of specialization) a monetary equilibrium exists. There are multiple stationary distributions of a given amount of money, which differ in their welfare levels. Thus, a redistribution of money affects real economic variables in this model. The monetary equilibrium reveals two essential features of money. First, the marginal expected utility of money decreases. Second, there exists an endogenous upper bound on the money holdings: agents willingly produce and sell for money up to this bound and refuse to do so if their money holdings exceed this bound.
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Volume (Year): 32 (2000)
Issue (Month): 2 (May)
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shi Shougong, 1995.
"Money and Prices: A Model of Search and Bargaining,"
Journal of Economic Theory,
Elsevier, vol. 67(2), pages 467-496, December.
- Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
- Li, Victor E., 1994. "Inventory accumulation in a search-based monetary economy," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 511-536, December.
- Berentsen, Aleksander, 2002.
"On the Distribution of Money Holdings in a Random-Matching Model,"
37319, University Library of Munich, Germany.
- Aleksander Berentsen, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 945-954, August.
- Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-41, February.
- Edward J. Green & Ruilin Zhou, 1996.
"A Rudimentary Random-Matching Model with Divisible Money and Prices,"
GE, Growth, Math methods
9606001, EconWPA, revised 25 Jul 1996.
- Green, Edward J. & Zhou, Ruilin, 1998. "A Rudimentary Random-Matching Model with Divisible Money and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 252-271, August.
- Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002.
"Indivisibilities, Lotteries, and Monetary Exchange,"
Journal of Economic Theory,
Elsevier, vol. 107(1), pages 70-94, November.
- Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," MPRA Paper 68582, University Library of Munich, Germany.
- 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.
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