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.
|Number of pages||20|
|Journal||Annals of Economics and Finance|
|Publication status||Published - 2015|
- Monetary steady state
- Random matching model
ASJC Scopus subject areas
- Economics and Econometrics