Multiplicity of monetary steady states

Ryoji Hiraguchi and Keiichiro Kobayashi

No 14-008E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: In the Lagos-Wright model of money, monetary frictions alone cannot be a source of equilibrium multiplicity. However, the conclusion depends on the assumption that the agents always enter the centralized market after completing a transaction in the decentralized markets. In this paper, we investigate a monetary model in which the centralized market opens once, but the decentralized markets open twice in each period. We show that as the sellers money balances affect the buyers problem in the first decentralized market, there may be multiple stationary equilibria.

Pages: 11
Date: 2014-09
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
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Journal Article: Multiplicity of monetary steady states (2015)
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