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Robustness of Stability to cost of carrying money in a Matching Model of Money

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  • Huang, Pidong

Abstract

This paper studies stability of monetary steady states in a Trejos-Wright random matching model of money with money holding set {0,1,2} and cost of carrying money. There kinds of steady states exist generically: pure-strategy full-support steady states, mixed-strategy full-support steady state, and non-full-support steady state. Stability analysis shows that full-support steady states are stable and determinate generically and that non-full-support steady state is stable and indeterminate if there is a small positive carrying cost.

Suggested Citation

  • Huang, Pidong, 2013. "Robustness of Stability to cost of carrying money in a Matching Model of Money," MPRA Paper 46625, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46625
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    File URL: https://mpra.ub.uni-muenchen.de/46625/1/MPRA_paper_46625.pdf
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    References listed on IDEAS

    as
    1. Huang, Pidong & Igarashi, Yoske, 2015. "Trejos–Wright with a 2-unit bound: Existence and stability of monetary steady states," Mathematical Social Sciences, Elsevier, vol. 73(C), pages 55-62.
    2. 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.
    3. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, vol. 70(3), pages 929-969, May.
    4. Wallace, Neil & Zhu, Tao, 2004. "A commodity-money refinement in matching models," Journal of Economic Theory, Elsevier, vol. 117(2), pages 246-258, August.
    5. Pidong Huang & Yoske Igarashi, 2013. "Why Ten $1’s Are Not Treated as a $10," Discussion Papers 1310, University of Exeter, Department of Economics.
    6. 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.
    7. Hector Lomeli & Ted Temzelides, 2002. "Discrete time dynamics in a random matching monetary model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 20(2), pages 259-269.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    random matching model; monetary steady state; instability; determinacy; Zhu (2003).;

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General

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