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Existence of steady states with positive consumption in the Kiyotaki-Wright model

  • S. Rao Aiyagari
  • Neil Wallace

We prove the general existence of steady states with positive consumption in an N goods and fiat money version of the Kiyotaki-Wright (“On money as a median of exchange,” Journal of Political Economy 1989, 97 (4), 927–54) model by admitting mixed strategies. We also show that there always exists a steady state in which everyone accepts a least costly-to-store object. In particular, if fiat money is one such object, then there always exists a monetary steady state. We also establish some other properties of steady states and comment on the relationship between steady states and (incentive) feasible allocations.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 428.

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Date of creation: 1991
Date of revision:
Publication status: Published in Review of Economic Studies (Vol. 58, No. 5, October 1991, pp. 901-916)
Handle: RePEc:fip:fedmwp:428
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  1. Timothy J. Kehoe & Nobuhiro Kiyotaki & Randall Wright, 1991. "More on money as a medium of exchange," Staff Report 140, Federal Reserve Bank of Minneapolis.
  2. Aiyagari, S Rao & Wallace, Neil, 1992. "Fiat Money in the Kiyotaki-Wright Model," Economic Theory, Springer, vol. 2(4), pages 447-64, October.
  3. 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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