TY - JOUR
T1 - A monetary theory with non-degenerate distributions
AU - Menzio, Guido
AU - Shi, Shouyong
AU - Sun, Hongfei
N1 - Funding Information:
An associate editor and three referees have given comments that helped revising the paper. We have also received helpful comments from participants of seminars and conferences at the Baumol–Tobin conference at New York University (2012), the Canadian Macro Study Group meeting (Vancouver, 2011), the Society for Economic Dynamics (Istanbul, 2009 and Montreal, 2010), U. of Calgary (2010), Tsinghua Macro Workshop (Beijing, 2010), Singapore Management U. (2010), National Taiwan U. (2010), Chicago FED Conference on Money, Banking, Payments and Finance (Chicago, 2009 and 2010), Research and Money and Markets (Toronto, 2009), the Society for the Advancement of Economic Theory (Ischia, Italy, 2009) and the Texas Monetary Conference (Austin, 2009). Shi and Sun gratefully acknowledge financial support from the Social Sciences and Humanities Research Council of Canada . Shi also acknowledges financial support from the Bank of Canada Fellowship and the Canada Research Chair . The opinion expressed in the paper is our own and does not reflect the view of the Bank of Canada. All errors are ours.
PY - 2013/11
Y1 - 2013/11
N2 - We construct and analyze a tractable search model of money with a non-degenerate distribution of money holdings. Analytical tractability comes from modeling decentralized exchange as directed search, which makes the monetary steady state block recursive. By adapting lattice-theoretic techniques, we characterize individuals' policy and value functions, and show that these functions satisfy the standard conditions of optimization. We prove that a unique monetary steady state exists and provide conditions under which the steady-state distribution of buyers over money balances is non-degenerate. Moreover, we analyze the properties of this distribution.
AB - We construct and analyze a tractable search model of money with a non-degenerate distribution of money holdings. Analytical tractability comes from modeling decentralized exchange as directed search, which makes the monetary steady state block recursive. By adapting lattice-theoretic techniques, we characterize individuals' policy and value functions, and show that these functions satisfy the standard conditions of optimization. We prove that a unique monetary steady state exists and provide conditions under which the steady-state distribution of buyers over money balances is non-degenerate. Moreover, we analyze the properties of this distribution.
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U2 - 10.1016/j.jet.2013.07.020
DO - 10.1016/j.jet.2013.07.020
M3 - Article
AN - SCOPUS:84888037023
SN - 0022-0531
VL - 148
SP - 2266
EP - 2312
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 6
ER -