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[ Article ] | |
Seoul Journal of Economics - Vol. 28, No. 4, pp. 389-414 | |
Abbreviation: SJE | |
ISSN: 1225-0279 (Print) | |
Print publication date 30 Nov 2015 | |
Received 04 Sep 2014 Revised 02 Oct 2015 Accepted 10 Nov 2015 | |
A Stability Analysis of a Multiple Denomination Equilibrium | |
Pidong Huang
| |
Assistant Professor, Department of Economics, Korea University, Anam-dong, Seongbuk-gu, Seoul 136-701, Korea, Tel: 82-2-3290-5133, Fax: 82-2-926-3601 (pidonghuang@korea.kr.ac) | |
Funding Information ▼ | |
JEL Classification: C62, C78, E40 |
We consider existence and stability in a simple version of Lee et al. (2005). For a sufficiently large discount factor, a steady state of full ― support wealth distribution and pure strategy exists, whereas for an intermediate discount factor, a steady state of mixed strategy exists. Both steady states are locally stable and determinate. All denominations are circulated in the mixed-strategy steady state, whereas larger denominations are not held in the other steady state. We also show that nonfull-support steady states exist, and are stable and indeterminate. This finding is in sharp contrast to that of Huang, and Igarashi (2014), which show instability of nonfull-support steady states in Lee et al. (2005)
Keywords: Random matching model, Carrying cost, Denomination, Instability, Determinacy |
We wish to thank the anonymous referee whose comments and suggestions were helpful in improving the quality of the paper. This paper is supported by a Korea University Grant (K1427101).
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6. | Trejos, Alberto, and Wright, Randall. “Search, Bargaining, Money and Prices.” Journal of Political Economy 103 (No. 1 1995): 118-41. |
7. | Zhu, Tao. “Existence of Monetary Steady States in a Matching Model: Indivisible Money.” Journal of Economic Theory 112 (No. 2 2003): 307-24. |
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