Dynamic monetary equilibrium in a random-matching economy

Edward Green () and Ruilin Zhou ()

No WP-00-1, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: This article concerns decentralized trading and efficiency. As in Gale (1986a, b), traders transfer endowments of divisible goods in random, pairwise meetings that take place in discrete time. Anonymity and absence of time preference forestall strategic power. As in Kiyotaki and Wright (1989), and in contrast to Gale, trade and consumption occur repeatedly. Absence of double coincidence of wants makes money essential. There is a continuum of welfare-ranked equilibria in which the level of economic activity is decreasing in the price level, from which Gale abstracts by focusing on relative prices. This indeterminacy constitutes coordination failure.

Keywords: Money; Trade; Consumption (Economics); Stock market (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mic and nep-mon
Date: 2000
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Journal Article: Dynamic Monetary Equilibrium in a Random Matching Economy (2002)
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