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| Author: | Shi, S. |
| Title: | A divisible search model of fiat money |
| Journal: | Econometrica
1997 : JAN, VOL. 65:1, p. 75-102 |
| Index terms: | TRADE MODELS MONEY MONETARY ECONOMICS |
| Language: | eng |
| Abstract: | This article extends the Kiyotaki-Wright search model of fiat money to incorporate divisible money and goods. The standard issues of monetary economics are examined, such as the neutrality and superneutrality of money by severing the artificial link in the Kiyotaki-Wright model between money supply and the number of money holders. Money is shown to be neutral, but not superneutral. Money growth generates a trading opportunity effect by changing the the fraction of different agents in the economy and the probability with which agents have successful matches. Walrasian monetary models are in addition familiar with the negative effect of money growth on the real money balance. The balance of these effects can imply a positive optimal money growth rate. |
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