The Essentiality of Money in Environments with Centralized Trade∗
نویسندگان
چکیده
A major concern in modern monetary theory is the construction of tractable models where money is essential. Lagos and Wright (2005) pioneered a class of models that address this concern. The key ingredient of the Lagos–Wright framework is that trade alternates between centralized and decentralized markets. In this paper, unlike the previous literature, we explicitly model the process of exchange in the centralized market. We show that there exists a tension between the essentiality of money and centralized trading and characterize conditions under which money is essential.
منابع مشابه
The Informational Role of Prices and the Essentiality of Money in the LagosWright Model
A major concern in modern monetary theory has been the development of models where money is essential and yet substantive issues can be analyzed in a tractable manner. At the center of this e¤ort is Lagos and Wright (2005). The tractability in their framework is due to the fact that trade alternates between a centralized market and a decentralized market. A widespread view is that money is esse...
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