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Robustness of Stability to cost of carrying money in a Matching Model of Money

Huang, Pidong (2013): Robustness of Stability to cost of carrying money in a Matching Model of Money.

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Abstract

This paper studies stability of monetary steady states in a Trejos-Wright random matching model of money with money holding set {0,1,2} and cost of carrying money. There kinds of steady states exist generically: pure-strategy full-support steady states, mixed-strategy full-support steady state, and non-full-support steady state. Stability analysis shows that full-support steady states are stable and determinate generically and that non-full-support steady state is stable and indeterminate if there is a small positive carrying cost.

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