Chao Gu () and
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Randall Wright: Department of Economics and Department of Finance, UW - Madison, FRB Chicago, FRB Minneapolis, and NBER
No 1601, Working Papers from Department of Economics, University of Missouri
We provide a series of results for a standard model where exchange is facilitated by liquid assets. Compared to past work, minimal structure is imposed on the mechanism determining the terms of trade. Four simple axioms lead to a class of mechanisms encompassing common bargaining theories, competitive price taking and other solution concepts. Using only the axioms, we establish existence and (perhaps more surprisingly) uniqueness of stationary monetary equilibrium. We also show how to support desirable outcomes using creatively designed mechanisms. Special cases include pure currency economies, but we also consider extensions to incorporate real assets and credit.
Keywords: Money; Mechanisms; Bargaining; Liquidity; Credit (search for similar items in EconPapers)
JEL-codes: E42 E51 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1601
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