Does the Search Model Succeed in Describing a Monetary Economy?

Masayuki Otaki

Chapter 15 in Keynesian Economics and Price Theory, 2015, pp 191-201 from Springer

Abstract: Abstract In this chapter, the question of whether the theories of Kiyotaki and Wright substantially contributed to the development of a new monetary theory in the vein of search theory is discussed. The following observations can be made: (i) Kiyotaki and Wright succeed in proving that the circulation of money improves economic welfare. However, this contribution is nothing more than that of the overlapping generations model developed by Samuelson and Lucas; and (ii) the equilibrium of a barter economy remains in the Kiyotaki and Wright model, which is an extension of the Diamond model. Based on this analysis, the present exercise rigorously proves that money never circulates in their model.

Keywords: Search theory of money; Dominance of money trader; Non-existence of the monetary economy (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advchp:978-4-431-55345-8_15

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DOI: 10.1007/978-4-431-55345-8_15

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