Robustness of Stability to Cost of Carrying Money in a Matching Model of Money

Pidong Huang ()
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Pidong Huang: Department of Economics, Korea University

Annals of Economics and Finance, 2015, vol. 16, issue 1, 95-114

Abstract: This paper studies stability of monetary steady states in a Trejos-Wright random matching model of money with the money holding set {0, 1, 2} and a cost of carrying money. Three steady states are generic: pure-strategy full- support steady state; mixed-strategy full-support steady state; and non-full- support steady state. Stability analysis shows that both full-support steady states are stable and determinate. The non-full-support steady state is stable and indeterminate if there is a sufficiently small positive carrying cost. The non-full-support steady state becomes unstable if the carrying cost is zero.

Keywords: Random matching model; Monetary steady state; Instability; Determinacy (search for similar items in EconPapers)
JEL-codes: C62 C78 E40 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2015:v:16:i:1:huang

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