Individual and Aggregate Real Balances in a Random-Matching Model

Ruilin Zhou ()

International Economic Review, 1999, vol. 40, issue 4, 1009-38

Abstract: This article investigates the characteristics of stationary single-price equilibrium in a monetary random-matching model where agents can hold an arbitrary amount of divisible money and where production is costly. At such an equilibrium, agents' money holdings are endogenously determined and uniformly bounded. A refinement of weakly undominated strategies is argued to be necessary. It is shown that a continuum of single-price equilibria indexed by the aggregate real-money balance exists if one such equilibrium exists. Equilibria with different money-holdings upper bounds, hence different distributions, but with identical aggregate real-money balances can coexist. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1999
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Working Paper: Individual and aggregate real balances in a random matching model (1996)
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