Stochastic Tastes and Money in a Neo-Keynesian Economy

Klaus Reiner Schenk-Hoppé ()

No iewwp088, IEW - Working Papers from Institute for Empirical Research in Economics - IEW

Abstract: This paper studies a monetary economy with heterogenous agents in which trade takes place in a centralized market. Each agent is a potential producer and consumer of a service (or perishable good) but has stochastic preferences that determines his taste for the good in each period in time. Money serves as a medium of exchange as well as a store of value. We prove existence of stationary fix-price equilibria with exogenously given quantity of money in which transactions can take place at non-Walrasian prices. Precautionary savings, under- and oversupply, dynamics on money holdings, and the effects of changes in the quantity of money are discussed.

Keywords: Microeconomic Models of Money; Stochastic Preferences; Fix-Price Equilibria; Rationing; Dynamics of Money Distributions (search for similar items in EconPapers)
JEL-codes: D51 E41 E52 (search for similar items in EconPapers)
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Persistent link: http://EconPapers.repec.org/RePEc:zur:iewwpx:088

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