Staff Report 140

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More on Money as a Medium of Exchange

Timothy J. Kehoe - Consultant
Nobuhiro Kiyotaki
Randall Wright - Consultant

Published May 1, 1991

Abstract
We extend the analysis of Kiyotaki and Wright, who study an economy in which the different commodities that serve as media of exchange are determined endogenously. Kiyotaki and Wright consider only symmetric, steady-state, pure-strategy equilibria, and find that for some parameter values no such equilibria exist. We consider mixed-strategy equilibria and dynamic equilibria. We prove that a steady-state equilibrium exists for all parameter values and that the number of steady-state equilibria is generically finite. We also show, however, that there may be a continuum of dynamic equilibria. Further, some dynamic equilibria display cycles.


Published In: Economic Theory (Vol 3, Num 2, April 1993, pp. 297-314)

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