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

  • Huang, Pidong

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.

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File URL: http://mpra.ub.uni-muenchen.de/46625/1/MPRA_paper_46625.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46625.

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Date of creation: 18 Apr 2013
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Handle: RePEc:pra:mprapa:46625
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  1. 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.
  2. Pidong Huang & Yoske Igarashi, 2013. "Why Ten $1’s Are Not Treated as a $10," Discussion Papers 1310, Exeter University, Department of Economics.
  3. Edward J. Green & Ruilin Zhou, 2000. "Dynamic monetary equilibrium in a random-matching economy," Working Paper Series WP-00-1, Federal Reserve Bank of Chicago.
  4. Pidong Huang & Yoske Igarashi, 2013. "Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states," Discussion Papers 1311, Exeter University, Department of Economics.
  5. 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.
  6. Wallace, Neil & Zhu, Tao, 2004. "A commodity-money refinement in matching models," Journal of Economic Theory, Elsevier, vol. 117(2), pages 246-258, August.
  7. Hector Lomeli & Ted Temzelides, 2002. "Discrete time dynamics in a random matching monetary model," Economic Theory, Springer, vol. 20(2), pages 259-269.
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