Stochastic Tastes and Money in a Neo-Keynesian Economy
This paper studies a monetary economy with heterogenous agents in which trade takes place in a centralized market. Each agent is a potential producer and consumer of a service (or perishable good) but has stochastic preferences that determines his taste for the good in each period in time. Money serves as a medium of exchange as well as a store of value. We prove existence of stationary fix-price equilibria with exogenously given quantity of money in which transactions can take place at non-Walrasian prices. Precautionary savings, under- and oversupply, dynamics on money holdings, and the effects of changes in the quantity of money are discussed.
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"A contribution to the pure theory of money,"
123, Federal Reserve Bank of Minneapolis.
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