Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states

Pidong Huang () and Yoske Igarashi
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Yoske Igarashi: Department of Economics, University of Exeter

No 1311, Discussion Papers from University of Exeter, Department of Economics

Abstract: This paper investigates a Trejos-Wright random matching model of money with a consumer take-it-or-leave-it offer and with individual money holdings in the set {0, 1, 2}. It is shown that three kinds of monetary steady state exist generically: (1) pure-strategy full-support steady states, (2) mixed-strategy full-support steady states, and (3) non-full-support steady states. A full-support steady state exists if and only if a non-full-support steady state exists. Stability of these steady states is also studied. Both pure-strategy and mixedstrategy full-support steady states are locally stable. However, non-full-support steady states are unstable.

Keywords: random matching model; monetary steady state; local stability; determinacy; instability; Zhu (2003). (search for similar items in EconPapers)
JEL-codes: C62 C78 E40 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dge, nep-gth, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://exetereconomics.github.io/RePEc/dpapers/DP1311.pdf (application/pdf)

Related works:
Journal Article: Trejos–Wright with a 2-unit bound: Existence and stability of monetary steady states (2015)
Working Paper: Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states (2013)
Working Paper: Trejos-Wright with a 2-unit bound: existence and stability of monetary steady states (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:exe:wpaper:1311

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