2006 | OriginalPaper | Buchkapitel
The distribution of money and prices in an equilibrium with lotteries
verfasst von : Aleksander Berentsen, Gabriele Camera, Christopher Waller
Erschienen in: Recent Developments on Money and Finance
Verlag: Springer Berlin Heidelberg
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We construct a tractable ‘fundamental’ model of money with equilibrium heterogeneity in money balances and prices. We do so by considering randomized monetary trades in a standard search-theoretic model of money where agents can hold multiple units of indivisible “tokens” and can offer lotteries on monetary transfers. By studying a simple trading pattern, we can analytically characterize the monetary distribution. Interestingly, such distributions match those observed in numerically simulated economies with fully divisible money and price heterogeneity.