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More on money as a medium of exchange

  • Timothy J. Kehoe
  • Nobuhiro Kiyotaki
  • Randall Wright

We extend the analysis of Kiyotaki and Wright, who study an economy in which the different commodities that serve as media of exchange are determined endogenously. Kiyotaki and Wright consider only symmetric, steady-state, pure-strategy equilibria, and find that for some parameter values no such equilibria exist. We consider mixed-strategy equilibria and dynamic equilibria. We prove that a steady-state equilibrium exists for all parameter values and that the number of steady-state equilibria is generically finite. We also show, however, that there may be a continuum of dynamic equilibria. Further, some dynamic equilibria display cycles.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 140.

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Date of creation: 1991
Date of revision:
Publication status: Published in Economic Theory (Vol 3, Num 2, 1993, pp. 297-314)
Handle: RePEc:fip:fedmsr:140
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  1. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  2. Balasko, Yves & Cass, David & Shell, Karl, 1980. "Existence of competitive equilibrium in a general overlapping-generations model," Journal of Economic Theory, Elsevier, vol. 23(3), pages 307-322, December.
  3. Timothy Kehoe, 1982. "Regularity in Overlapping Generations Exchange Economies," UCLA Economics Working Papers 258, UCLA Department of Economics.
  4. Kehoe, Timothy J, 1985. "Multiplicity of Equilibria and Comparative Statics," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 119-47, February.
  5. T. J. Kehoe & D. K. Levine, 1982. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Working papers 312, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Nobuhiro Kiyotaki & Randall Wright, 1990. "Search for a Theory of Money," NBER Working Papers 3482, National Bureau of Economic Research, Inc.
  7. Azariadis, Costas & Guesnerie, Roger, 1986. "Sunspots and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 725-37, October.
  8. Aiyagari, S Rao & Wallace, Neil, 1991. "Existence of Steady States with Positive Consumption in the Kiyotaki-Wright Model," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 901-16, October.
  9. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
  10. Benhabib, Jess & Day, Richard H., 1982. "A characterization of erratic dynamics in, the overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 4(1), pages 37-55, November.
  11. Jovanovic, Boyan & Rosenthal, Robert W., 1986. "Anonymous Sequential Games," Working Papers 86-12, C.V. Starr Center for Applied Economics, New York University.
  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 927-54, August.
  13. Aiyagari, S Rao & Wallace, Neil, 1992. "Fiat Money in the Kiyotaki-Wright Model," Economic Theory, Springer, vol. 2(4), pages 447-64, October.
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