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 language | English |
|---|---|
| Pages (from-to) | 95-114 |
| Number of pages | 20 |
| Journal | Annals of Economics and Finance |
| Volume | 16 |
| Issue number | 1 |
| Publication status | Published - 2015 |
Keywords
- Determinacy
- Instability
- Monetary steady state
- Random matching model
ASJC Scopus subject areas
- Economics and Econometrics
- Finance