A Rudimentary Random-Matching Model with Divisible Money and Prices

Edward Green and Ruilin Zhou ()

GE, Growth, Math methods from University Library of Munich, Germany

Abstract: We consider a version of Kiyotaki and Wright's monetary search model in which agents can hold arbitrary amounts of divisible money. A continuum of stationary equilibria, indexed by the aggregate real-money stock, exist with all trading occurring at a single price. There is always a maximum level of the real money stock consistent with existence of such an equilibrium. In the limit as trading becomes faster relative to discounting, any real money stock becomes feasible in such an equilibrium. In contrast to the original Kiyotaki-Wright model, higher equilibrium real money stocks unambiguously correspond to higher welfare.

JEL-codes: D51 E40 (search for similar items in EconPapers)
Date: 1996-06-01, Revised 1996-12-23
Note: LaTeX file. Some definitions and notation have been revised to correspond to those used in ewp-ge/9612001.
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Related works:
Journal Article: A Rudimentary Random-Matching Model with Divisible Money and Prices (1998)
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