CARESS Working Paper #95-17 A Rudimentary Model of Search with Divisible Money and Prices
نویسندگان
چکیده
We consider a version of Kiyotaki and Wright's monetary search model in which agents can hold arbitrary amounts of divisible money. A continuum of stationary equilibriums, indexed by the aggregate real-money stock, exist with all trading occurring at a single price. There is always a maximum level of the real money stock consistent with existence of such an equilibrium. In the limit as trading becomes faster relative to discounting, any real money stock becomes feasible in such an equilibrium. In contrast to the original Kiyotaki-Wright model, higher equilibrium real money stocks unambiguously correspond to higher welfare. ¤ This paper was written while Ed Green was BP Visiting Professor at the London School of Economics. We thank Warren Weber, Juan Renero and Helene Rey for helpful comments on an earlier draft. The authors can be contacted at \[email protected]" and \[email protected]". The views expressed in this paper are those of the authors, and do not necessarily re°ect those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.
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