Search, money and capital: a neoclassical dichotomy
Recent work has reduced the gap between search-based monetary theory and mainstream macroeconomics by incorporating into the search model some centralized markets as well as some decentralized markets where money is essential. This paper takes a further step towards this integration by introducing labor, capital and neoclassical firms. The resulting framework nests the search-theoretic monetary model and a standard neoclassical growth model as special cases. Perhaps surprisingly, it also exhibits a dichotomy: one can determine the equilibrium path for the value of money independently of the paths of consumption, investment and employment in the centralized market.
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- Ricardo Lagos & Randall Wright, 2002.
"Dynamics, cycles and sunspot equilibria in "genuinely dynamic, fundamentally disaggregative" models of money,"
0210, Federal Reserve Bank of Cleveland.
- Lagos, Ricardo & Wright, Randall, 2003. "Dynamics, cycles, and sunspot equilibria in 'genuinely dynamic, fundamentally disaggregative' models of money," Journal of Economic Theory, Elsevier, vol. 109(2), pages 156-171, April.
- 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.
- Rogerson, Richard, 1988.
"Indivisible labor, lotteries and equilibrium,"
Journal of Monetary Economics,
Elsevier, vol. 21(1), pages 3-16, January.
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