Existence of Steady States With Positive Consumption in the Kiyotaki-Wright Model

Abstract

We prove the general existence of steady states with positive consumption in an N goods and fiat money version of the Kiyotaki-Wright (“On money as a median of exchange,” _Journal of Political Economy_ 1989, 97 (4), 927–54) model by admitting mixed strategies. We also show that there always exists a steady state in which everyone accepts a least costly-to-store object. In particular, if fiat money is one such object, then there always exists a monetary steady state. We also establish some other properties of steady states and comment on the relationship between steady states and (incentive) feasible allocations.

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