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Real Indeterminacy of Stationary Equilibria in Matching Models with Divisible Money

  • Kazuya Kamiya

    (Faculty of Economics, University of Tokyo)

  • Takashi Shimizu

    (Faculty of Economics, Kansai University)

In this paper, it is shown that real indeterminacy of stationary equilibria generically arises in most matching models with perfectly divisible fiat money. In other words, the real indeterminacy follows from the condition for stationarity of money holdings, and surprisingly it has nothing to do with the other specifications, e.g., the bargaining procedures, of the models. Thus if we assume the divisibility of money in money search models, it becomes quite difficult to make accurate predictions of the effects of some policies.

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File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2005/2005cf390.pdf
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-390.

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Length: 34 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:tky:fseres:2005cf390
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  1. Edward J. Green & Ruilin Zhou, 1996. "A Rudimentary Random-Matching Model with Divisible Money and Prices," GE, Growth, Math methods 9606001, EconWPA, revised 25 Jul 1996.
  2. Timothy J Kehoe & David K Levine, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Levine's Working Paper Archive 1873, David K. Levine.
  3. Laan, Gerard van der, 1982. "Simplicial approximation of unemployment equilibria," Journal of Mathematical Economics, Elsevier, vol. 9(1-2), pages 83-97, January.
  4. Akihiko Matsui & Takashi Shimizu, 2005. "A Theory Of Money And Marketplaces," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 35-59, 02.
  5. Zhou, Ruilin, 2003. "Does commodity money eliminate the indeterminacy of equilibrium?," Journal of Economic Theory, Elsevier, vol. 110(1), pages 176-190, May.
  6. Shouyong Shi, 1995. "Money and Prices: A Model of Search and Bargaining," Working Papers 916, Queen's University, Department of Economics.
  7. Kazuya Kamiya & Takashi Shimizu, 2007. "On The Role Of Tax Subsidy Scheme In Money Search Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 575-606, 05.
  8. Kazuya Kamiya & Noritsugu Morishita & Takashi Shimizu, 2004. "On the Existence of Single-Price Equilibria in a Matching Model with Divisible Money and Production Cost," CIRJE F-Series CIRJE-F-283, CIRJE, Faculty of Economics, University of Tokyo.
  9. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
  10. Herings, P. Jean-Jacques, 1998. "On the existence of a continuum of constrained equilibria1," Journal of Mathematical Economics, Elsevier, vol. 30(3), pages 257-273, October.
  11. John Geanakoplos & Andreu Mas-Colell, 1985. "Real Indeterminacy with Financial Assets," Cowles Foundation Discussion Papers 770R, Cowles Foundation for Research in Economics, Yale University, revised Oct 1985.
  12. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, vol. 70(3), pages 929-969, May.
  13. Kazuya Kamiya & Takashi Shimizu, 2007. "Existence of Equilibria in Matching Models of Money: A New Technique," Economic Theory, Springer, vol. 32(3), pages 447-460, September.
  14. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
  15. Kazuya Kamiya & Takashi Sato, 2004. "Equilibrium Price Dispersion in a Matching Model with Divisible Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 413-430, 05.
  16. Koji Shimomura & Kazuo Nishimura, 2001. "Trade and Indeterminacy in a Dynamic General Equilibrium Model," Discussion Paper Series 117, Research Institute for Economics & Business Administration, Kobe University.
  17. repec:cup:cbooks:9780521265140 is not listed on IDEAS
  18. Zhou, Ruilin, 1999. "Individual and Aggregate Real Balances in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1009-38, November.
  19. 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.
  20. Shouyong Shi, 1996. "A Divisible Search Model of Fiat Money," Working Papers 930, Queen's University, Department of Economics.
  21. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
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