A Matching Model with Bounded Holdings of Indivisible Money

Alexander Taber and Neil Wallace ()

International Economic Review, 1999, vol. 40, issue 4, 961-84

Abstract: Recent versions of pairwise random matching models of money with divisible and perishable goods are amended to allow individuals to hold more than one unit of an indivisible asset. The asset resembles a fiat asset, except that nominal holdings of it yield a small amount of utility. There is a general upper bound on the number of units of the asset that individuals can hold. A steady state with trade is shown to exist. The model is applied to study numerically the effect on welfare of the degree to which the asset is divisible. 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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