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More on Money as a Medium of Exchange

Staff Report 140 | Published May 1, 1991

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Timothy J. Kehoe Consultant, University of Minnesota, and National Bureau of Economic Research
More on Money as a Medium of Exchange


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, No. 2, April 1993, pp. 297-314)