Document Type

Article

Publication Date

2004

Abstract

We construct a tractable ‘fundamental’ model of money with equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible ‘tokens’ and can offer lotteries on monetary transfers. By studying a simple trading pattern, we can analytically characterize the monetary distribution. Interestingly, such distributions match those observed in numerically simulated economies with fully divisible money and price heterogeneity.

Comments

This is a pre-copy-editing, author-produced PDF of an article accepted for publication in Economic Theory, volume 24, issue 4, in 2004 following peer review. The final publication is available at Springer via DOI: 10.1007/s00199-004-0485-5

Peer Reviewed

1

Copyright

Springer

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.