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A model of money with multilateral matching

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  • Galenianos, Manolis
  • Kircher, Philipp

Abstract

We develop a model of decentralized monetary exchange to examine the distributional effects of inflation across heterogeneous agents. The agents have private information about their productivity, preferences, or money holdings. Matching is multilateral and each seller is visited by a stochastic number of buyers. The good is allocated according to a second-price auction in money. In equilibrium, homogeneous buyers hold different amounts of money leading to price dispersion. We find the closed-form solution for the distribution of money holdings. Entry of sellers is suboptimal except at the Friedman rule. Inflation acts as a regressive tax.

Suggested Citation

  • Galenianos, Manolis & Kircher, Philipp, 2008. "A model of money with multilateral matching," LSE Research Online Documents on Economics 29701, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:29701
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    References listed on IDEAS

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    Cited by:

    1. Kala Krishna & Lena Sheveleva, 2014. "Wheat or Strawberries? Intermediated Trade with Limited Contracting," NBER Working Papers 20630, National Bureau of Economic Research, Inc.
    2. Menzio, Guido & Shi, Shouyong & Sun, Hongfei, 2013. "A monetary theory with non-degenerate distributions," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2266-2312.
    3. Baisa, Brian & Rabinovich, Stanislav, 2016. "Optimal auctions with endogenous budgets," Economics Letters, Elsevier, vol. 141(C), pages 162-165.
    4. Stephen D. Williamson & Randall Wright, 2010. "New monetarist economics: methods," Review, Federal Reserve Bank of St. Louis, issue May, pages 265-302.
    5. repec:aea:aejmic:v:9:y:2017:i:3:p:28-62 is not listed on IDEAS
    6. He, Ping & Huang, Lixin & Wright, Randall, 2008. "Money, banking, and monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(6), pages 1013-1024, September.
    7. Venky Venkateswaran & Randall Wright, 2014. "Pledgability and Liquidity: A New Monetarist Model of Financial and Macroeconomic Activity," NBER Macroeconomics Annual, University of Chicago Press, vol. 28(1), pages 227-270.
    8. Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96 Elsevier.
    9. 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.
    10. R. O. Cavalcanti & Daniela Puzzello, 2010. "Stationarity without degeneracy in a model of commodity money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(2), pages 263-280, May.
    11. Han, Han & Julien, Benoît & Petursdottir, Asgerdur & Wang, Liang, 2016. "Equilibrium using credit or money with indivisible goods," Journal of Economic Theory, Elsevier, vol. 166(C), pages 152-163.
    12. Beker, Pablo F. & Hernando-Veciana, Ángel, 2015. "The dynamics of bidding markets with financial constraints," Journal of Economic Theory, Elsevier, vol. 155(C), pages 234-261.
    13. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    14. Gu, Chao & Wright, Randall, 2016. "Monetary mechanisms," Journal of Economic Theory, Elsevier, vol. 163(C), pages 644-657.

    More about this item

    Keywords

    Money; Private information; Multilateral matching;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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