Search-based models of money and finance: An integrated approach

Alberto Trejos and Randall Wright

Journal of Economic Theory, 2016, vol. 164, issue C, 10-31

Abstract: Many applications in monetary economics of search-and-bargaining theory use Shi–Trejos–Wright, hereafter STW; many applications in finance use Duffie–Gârleanu–Pedersen, hereafter DGP. These models share several features, and both concern liquidity, yet they also differ: in STW agents use assets as payment instruments when trading goods; in DGP they pay with goods (or transferable utility) when trading assets. We integrate the two. This clarifies connections between the literatures, and generates novel insights. Several new results are provided for the baseline STW and DGP models, while the integrated structure generates even more interesting outcomes, including endogenous transactions patterns and belief-based dynamics.

Keywords: Search; Bargaining; Money; Finance (search for similar items in EconPapers)
JEL-codes: E40 E44 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Working Paper: Search-Based Models of Money and Finance: An Integrated Approach (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:164:y:2016:i:c:p:10-31

DOI: 10.1016/j.jet.2014.11.005

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