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A New Technique for Proving the Existence of Monetary Equilibria in Matching Models with Divisible Money

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  • Kazuya Kamiya

    (Faculty of Economics, University of Tokyo)

  • Takashi Shimizu

    (Faculty of Economics, Kansai University)

Abstract

This paper develops a new technique for proving the existence of monetary equilibria in money search models. In money search models with divisible money, the set of equilibria, if it exists, is at least one-dimensional. We develop a method to prove the existence of such a set in a fairly simple way. That is, we first find an endpoint of the set of equilibria and then we prove the existence of a continuum of the set of equilibria from this endpoint. Solving for these equilibria is complicated otherwise than using our method. Thus, our technique is simple but very powerful. Further, we consider a rather complicated bargaining procedure that allows us to prove the existence of equilibria in money search model with perfectly divisible goods and money.

Suggested Citation

  • Kazuya Kamiya & Takashi Shimizu, 2005. "A New Technique for Proving the Existence of Monetary Equilibria in Matching Models with Divisible Money," CARF F-Series CARF-F-037, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf037
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    References listed on IDEAS

    as
    1. Zhu, Tao, 2005. "Existence of a monetary steady state in a matching model: divisible money," Journal of Economic Theory, Elsevier, vol. 123(2), pages 135-160, August.
    2. Kamiya, Kazuya & Shimizu, Takashi, 2006. "Real indeterminacy of stationary equilibria in matching models with divisible money," Journal of Mathematical Economics, Elsevier, vol. 42(4-5), pages 594-617, August.
    3. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
    4. S. Rao Aiyagari & Neil Wallace, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(5), pages 901-916.
    5. Zhou, Ruilin, 1999. "Individual and Aggregate Real Balances 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. 40(4), pages 1009-1038, November.
    6. Kazuya Kamiya & Takashi Sato, 2004. "Equilibrium Price Dispersion in a Matching Model with Divisible Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 413-430, May.
    7. 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.
    8. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
    9. 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.
    10. Herings, P.J.J. & Talman, A.J.J. & Zang, Z., 1994. "The computation of a continuum of constrained equilibria," Discussion Paper 1994-38, Tilburg University, Center for Economic Research.
    11. Jean-Jacques Herings & Dolf Talman & Zaifu Yang, 1996. "The Computation of a Continuum of Constrained Equilibria," Mathematics of Operations Research, INFORMS, vol. 21(3), pages 675-696, August.
    12. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
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    Cited by:

    1. 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.

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