Munich Personal RePEc Archive

Stationarity without Degeneracy in a Model of Commodity Money

de O. Cavalcanti, Ricardo and Puzzello, Daniela (2009): Stationarity without Degeneracy in a Model of Commodity Money. Forthcoming in: Economic Theory

[img]
Preview
PDF
MPRA_paper_17125.pdf

Download (170kB) | Preview

Abstract

We develop a model of macroeconomic heterogeneity inspired by the Kiyotaki-Wright (1989) formulation of commodity money, with the addition of linear utility and idiosyncratic shocks to savings. We consider two environments. In the benchmark case, the consumer in a meeting is chosen randomly. In the auctions case, the individual holding more money can be selected to be the consumer. We show that in both environments socially optimal trading decisions (that are individually acceptable) are stationary and solve a tractable static op- timization problem. Savings decisions in the benchmark case are re- markably invariant to mean-preserving changes in the distribution of shocks. This result is overturned in the auctions case.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.