Robustness of stability to cost of carrying money in a matching model of money

Pidong Huang

Research output: Contribution to journalArticle

Abstract

This paper studies stability of monetary steady states in a Trejos-Wright random matching model of money with the money holding set f0; 1; 2g and a cost of carrying money. Three steady states are generic: pure-strategy full- support steady state; mixed-strategy full-support steady state; and non-full- support steady state. Stability analysis shows that both full-support steady states are stable and determinate. The non-full-support steady state is stable and indeterminate if there is a sufficiently small positive carrying cost. The non-full-support steady state becomes unstable if the carrying cost is zero.

Original languageEnglish
Pages (from-to)95-114
Number of pages20
JournalAnnals of Economics and Finance
Volume16
Issue number1
Publication statusPublished - 2015

Keywords

  • Determinacy
  • Instability
  • Monetary steady state
  • Random matching model

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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