IDEAS home Printed from https://ideas.repec.org/a/mcb/jmoncb/v32y2000i2p168-78.html
   My bibliography  Save this article

Money Inventories in Search Equilibrium

Author

Listed:
  • Berentsen, Aleksander

Abstract

The paper relaxes the one unit storage capacity imposed in the basic search-theoretic model of fiat money with indivisible real commodities and indivisible money. Agents can accumulate as much money as they want. It characterizes the stationary distributions of money and shows that for reasonable parameter values (e.g. production cost, discounting, degree of specialization) a monetary equilibrium exists. There are multiple stationary distributions of a given amount of money, which differ in their welfare levels. Thus, a redistribution of money affects real economic variables in this model. The monetary equilibrium reveals two essential features of money. First, the marginal expected utility of money decreases. Second, there exists an endogenous upper bound on the money holdings: agents willingly produce and sell for money up to this bound and refuse to do so if their money holdings exceed this bound.

Suggested Citation

  • Berentsen, Aleksander, 2000. "Money Inventories in Search Equilibrium," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(2), pages 168-178, May.
    • Handle: RePEc:mcb:jmoncb:v:32:y:2000:i:2:p:168-78
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Aleksander Berentsen, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 945-954, August.
    2. Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," Journal of Economic Theory, Elsevier, vol. 107(1), pages 70-94, November.
    3. Green, Edward J. & Zhou, Ruilin, 1998. "A Rudimentary Random-Matching Model with Divisible Money and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 252-271, August.
    4. Camera, Gabriele & Corbae, Dean, 1999. "Money and Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 985-1008, November.
    5. Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
    6. Shi Shougong, 1995. "Money and Prices: A Model of Search and Bargaining," Journal of Economic Theory, Elsevier, vol. 67(2), pages 467-496, December.
    7. Li, Victor E., 1994. "Inventory accumulation in a search-based monetary economy," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 511-536, December.
    8. Trejos, Alberto & Wright, Randall, 1995. "Search, Bargaining, Money, and Prices," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 118-141, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Thorsten Hens & Klaus Reiner Schenk‐Hoppé & Bodo Vogt, 2007. "The Great Capitol Hill Baby Sitting Co‐op: Anecdote or Evidence for the Optimum Quantity of Money?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1305-1333, September.
    2. Rocheteau, Guillaume & Weill, Pierre-Olivier & Wong, Russell, 2018. "A tractable model of monetary exchange with ex-post heterogeneity," Theoretical Economics, Econometric Society, vol. 13(3), September.
    3. Klumpp, Tilman, 2021. "Stockpiling and Shortages (the “Toilet Paper Paper")," Working Papers 2021-2, University of Alberta, Department of Economics.
    4. Tsunao Okumura, 2006. "Wealth As A Signal In The Search Model Of Money ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 87-106, February.
    5. Aleksander Berentsen, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 945-954, August.
    6. Peter Rupert & Martin Schindler & Andrei Shevchenko & Randall Wright, 2000. "The search-theoretic approach to monetary economics: a primer," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 10-28.
    7. Aleksander Berentsen & Guillaume Rocheteau, 2002. "Money in Bilateral Trade," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 489-506, December.
    8. Young Sik Kim & Manjong Lee, 2012. "Return on Commodity Money, Small Change Problems, and Fiat Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(2‐3), pages 533-549, March.
    9. Berentsen, Aleksander & Rocheteau, Guillaume, 2002. "On the efficiency of monetary exchange: how divisibility of money matters," Journal of Monetary Economics, Elsevier, vol. 49(8), pages 1621-1649, November.
    10. Thomas Wiseman, 2015. "A Note on the Essentiality of Money under Limited Memory," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(4), pages 881-893, October.
    11. Klaus Rainer Schenk-Hopp�, "undated". "Stochastic Tastes and Money in a Neo-Keynesian Economy," IEW - Working Papers 088, Institute for Empirical Research in Economics - University of Zurich.
    12. Berentsen, Aleksander & Molico, Miguel & Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," Journal of Economic Theory, Elsevier, vol. 107(1), pages 70-94, November.
    13. Mihaela Schaar & Jie Xu & William Zame, 2013. "Efficient online exchange via fiat money," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(2), pages 211-248, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96, Elsevier.
    2. Aleksander Berentsen & Guillaume Rocheteau, 2002. "Money in Bilateral Trade," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 489-506, December.
    3. Trejos, Alberto & Wright, Randall, 2016. "Search-based models of money and finance: An integrated approach," Journal of Economic Theory, Elsevier, vol. 164(C), pages 10-31.
    4. Stephen D. Williamson & Randall Wright, 2010. "New monetarist economics: methods," Review, Federal Reserve Bank of St. Louis, vol. 92(May), pages 265-302.
    5. Tsunao Okumura, 2006. "Wealth As A Signal In The Search Model Of Money ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 87-106, February.
    6. Ricardo Lagos & Randall Wright, 2005. "A Unified Framework for Monetary Theory and Policy Analysis," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 463-484, June.
    7. Burdett, Kenneth & Trejos, Alberto & Wright, Randall, 2017. "A new suggestion for simplifying the theory of money," Journal of Economic Theory, Elsevier, vol. 172(C), pages 423-450.
    8. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2011. "Information and Liquidity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 355-377, October.
    9. Aleksander Berentsen, 2002. "On the Distribution of Money Holdings in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 945-954, August.
    10. Rocheteau, Guillaume & Rupert, Peter & Shell, Karl & Wright, Randall, 2008. "General equilibrium with nonconvexities and money," Journal of Economic Theory, Elsevier, vol. 142(1), pages 294-317, September.
    11. Kim, Young Sik & Lee, Manjong, 2010. "A model of debit card as a means of payment," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1359-1368, August.
    12. Kazuya Kamiya & Takashi Shimizu, 2005. "A New Technique for Proving the Existence of Monetary Equilibria in Matching Models with Divisible Money," CIRJE F-Series CIRJE-F-347, CIRJE, Faculty of Economics, University of Tokyo.
    13. Guillaume Rocheteau & Randall Wright, 2005. "Money in Search Equilibrium, in Competitive Equilibrium, and in Competitive Search Equilibrium," Econometrica, Econometric Society, vol. 73(1), pages 175-202, January.
    14. Young Sik Kim & Manjong Lee, 2009. "Wealth Distribution, Inflation Tax, and Societal Benefits of Illiquid Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 809-830, August.
    15. Guillaume Rocheteau & Peter Rupert & Randall Wright, 2007. "Inflation and Unemployment in General Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 837-855, December.
    16. Rocheteau, Guillaume & Rupert, Peter & Shell, Karl & Wright, Randall, 2005. "General Equilibrium with Nonconvexities, Sunspots, and Money," Working Papers 05-16, Cornell University, Center for Analytic Economics.
    17. Ben R. Craig & Christopher J. Waller, 2000. "Dual-currency economies as multiple-payment systems," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 2-13.
    18. Edward J. Green & Ruilin Zhou, 2002. "Dynamic Monetary Equilibrium in a Random Matching Economy," Econometrica, Econometric Society, vol. 70(3), pages 929-969, May.
    19. Ed Nosal & Guillaume Rocheteau, 2006. "The economics of payments," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Feb.
    20. Han, Han & Julien, Benoît & Petursdottir, Asgerdur & Wang, Liang, 2016. "Equilibrium using credit or money with indivisible goods," Journal of Economic Theory, Elsevier, vol. 166(C), pages 152-163.

    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mcb:jmoncb:v:32:y:2000:i:2:p:168-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.