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Does and Should a Commodity Medium of Exchange Have Relatively Low Storage Costs?

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  • Renero, Juan-Manuel

Abstract

I provide new existence and welfare results for a version of the Kiyotaki-Wright model. I construct an equilibrium where all agents use mixed strategies. Consequently, an object with a higher storage cost must have a higher acceptability. Therefore, the endogenous transaction pattern corresponds to the observation that money is dominated in rate of return by other assets (e.g., bonds), something that is a central issue in monetary economics. Furthermore, at least in a neighborhood of equal storage costs, the equilibrium that I construct Pareto dominates alternative equilibria in which better objects are widely accepted. Copyright 1999 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Renero, Juan-Manuel, 1999. "Does and Should a Commodity Medium of Exchange Have Relatively Low Storage Costs?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 251-264, May.
    • Handle: RePEc:ier:iecrev:v:40:y:1999:i:2:p:251-64
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    Cited by:

    1. Oberfield, Ezra & Trachter, Nicholas, 2012. "Commodity money with frequent search," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2332-2356.
    2. Kiyotaki, Nobuhiro & Lagos, Ricardo & Wright, Randall, 2016. "Introduction to the symposium issue on money and liquidity," Journal of Economic Theory, Elsevier, vol. 164(C), pages 1-9.
    3. Juan-Manuel Renero, 2000. "May the Worst Commodity Standard be the Best? A Re-enactment of "The Crimes of 1873"," Econometric Society World Congress 2000 Contributed Papers 1522, Econometric Society.
    4. Hu, Tai-Wei & Rocheteau, Guillaume, 2013. "On the coexistence of money and higher-return assets and its social role," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2520-2560.
    5. Andrés Álvarez & Vincent Bignon, 2013. "L. Walras and C. Menger: two ways on the path of modern monetary theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 20(1), pages 89-124, February.
    6. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2001. "Cigarette Money," Journal of Economic Theory, Elsevier, vol. 99(1-2), pages 117-142, July.

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