A monetary theory with non-degenerate distributions

Guido Menzio, Shouyong Shi, Hongfei Sun

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)2266-2312
Number of pages47
JournalJournal of Economic Theory
Volume148
Issue number6
DOIs
StatePublished - Nov 1 2013

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Monetary theory
Value function
Modeling
Buyers
Policy function
Directed search

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

Menzio, Guido ; Shi, Shouyong ; Sun, Hongfei. / A monetary theory with non-degenerate distributions. In: Journal of Economic Theory. 2013 ; Vol. 148, No. 6. pp. 2266-2312.
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A monetary theory with non-degenerate distributions. / Menzio, Guido; Shi, Shouyong; Sun, Hongfei.

In: Journal of Economic Theory, Vol. 148, No. 6, 01.11.2013, p. 2266-2312.

Research output: Contribution to journalArticle

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