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Stationarity without Degeneracy in a Model of Commodity Money

Ricardo Cavalcanti and Daniela Puzzello

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a model of macroeconomic heterogeneity inspired by the Kiyotaki-Wright (1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static op- timization problem. Savings decisions in the benchmark case are re- markably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.

Keywords: Macroeconomics with heterogeneous savings; commodity money with linear adjustments; mechanism design; auctions (search for similar items in EconPapers)
JEL-codes: C00 E00 (search for similar items in EconPapers)
Date: 2009-03
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Stationarity without degeneracy in a model of commodity money (2010) Downloads
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