The Short-Run Effects of Unanticipated Monetary Shocks under Distinct Trading Mechanisms

Luis Araujo () and Andrei Shevchenko ()
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Andrei Shevchenko: Michigan State University

Russian Journal of Money and Finance, 2018, vol. 77, issue 3, 76-88

Abstract: We unveil the existence of a trade-off between efficiency and information transmission in a decentralized economy subject to a monetary shock. If the objective is to maximize information transmission, then the optimal trading protocol is inherently inefficient. If, instead, the objective is to maximize efficiency, then the optimal trading protocol is necessarily uninformative.

Keywords: monetary uncertainty; search; information transmission; trading protocols (search for similar items in EconPapers)
JEL-codes: D82 D83 E40 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bkr:journl:v:77:y:2018:i:3:p:76-88

DOI: 10.31477/rjmf.201803.76

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