Search-Money-and-Barter Models of Financial Stabilization

Svetlana Boyarchenko () and S.Z. Levendorskii

No 332, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan Stephen M. Ross Business School

Abstract: A macroeconomic model based on search-theoretical foundations is built to show that in an economy with structural deficiencies of the Russian Virtual Economy, money substitutes appear as a result of optimizing behavior of agents. Moreover, the volume of money substitutes is typically large, and it is impossible to reduce their volume significantly by using standard instruments as an increase of the money supply or decreasing the tax level. The result obtains for an economy, where there are large natural monopolies and widespread informal networks.

Date: 2000-07-01
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