Existence and efficiency of general equilibrium with commodity money is investigated in an economy where N commodities are traded at N(N − 1)/2 commodity-pairwise trading posts. Trade is a resource-using activity recovering transaction costs through the spread between bid (wholesale) and ask (retail) prices. Budget constraints, enforced at each trading post separately, imply demand for a carrie...

We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the United States, the United Kingdom, and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard “Taylor-type” rule or as arguments in an augmented interest rate rule. Our empirical evidence, based on measures of th...

This paper attempts a resolution of the Fisher effect puzzle in terms of estimator choice. Using both short-term and long-term interest rates for 14 OECD countries, we find ample evidence supporting the existence of a long-run Fisher effect in which interest rates move oneto-one with inflation. Our results suggest that the reason why the Fisher effect has not found support internationally lies ...

Sloan School of Management and Operations Research Center, Massachusetts Institute of Technology, 77 Massachusetts Avenue, E40-147, Cambridge, MA 02139, USA Operations Research Center, Massachusetts Institute of Technology, 77 Massachusetts Avenue, E40-130, Cambridge, MA 02139, USA Department of Electrical Engineering and Computer Science, Massachusetts Institute of Technology, 77 Massachusetts...

Existence of a monetary steady state is established in a random matching model with divisible goods, divisible money, an arbitrary bound on individual money holdings, and take-it-or-leave-it offers by consumers. The monetary steady state shown to exist has nice properties: the value function, defined on money holdings, is strictly increasing and strictly concave, and the distribution over money...

We consider an economy where trade is decentralized and agents have incomplete information with respect to the value of money. Agents’ learning evolves from private experiences and we explore how the formation of prices interacts with learning. We show that multiple equilibria arise, and equilibria with price dispersion entail more learning than equilibria with one price. Price dispersion incre...

Despite its important role in macroeconomics and finance, the expectations hypothesis (EH) of the term structure of interest rates has received little empirical support. While the EH’s poor performance has been attributed to a variety of sources, none appear to account for the EH’s poor performance. Recent evidence (Diebold and Li, 2003; Duffee, 2002; and Carriero, et al., 2003) suggests the po...

This paper employs an arti cial agent{based computational approach to understanding and designing laboratory environments in which to test Kiyotaki and Wright's search model of money. The behavioral rules of the arti cial agents are modeled on the basis of prior evidence from human subject experiments. Simulations of the arti cial agent{based model are conducted in two new versions of the Kiyot...

The aim of this study is to investigate the understanding of wealth, poverty, inequality and unemployment in South African Black (African) children aged 7, 9, 11 and 14 drawn from a rural, an urban and a semi-urban setting. Two hundred and twenty-®ve children (80 rural, 60 urban and 85 semi-urban) were interviewed individually in Setswana, their mother tongue. The urban children were living in ...