A Rudimentary Model of Search with Divisible Money and Prices

Posted: 18 Dec 1996

See all articles by Edward J. Green

Edward J. Green

Federal Reserve Bank of Chicago

Ruilin Zhou

Penn State University

Date Written: Undated

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 Classification: C6, D5, D9, D5

Suggested Citation

Green, Edward J. and Zhou, Ruilin, A Rudimentary Model of Search with Divisible Money and Prices (Undated). Available at SSRN: https://ssrn.com/abstract=3608

Edward J. Green

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States

Ruilin Zhou (Contact Author)

Penn State University ( email )

524 Kern Graduate Building
Department of Economics
University Park, PA 16802
United States

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