A Note on Monotone Comparative Statics for Monetary Directed Search Models

Abstract

This note uses monotone methods to derive two sets of comparative statics results for monetary directed search models. First, it characterizes the impact of a higher inflation rate or a higher cost of using credit on market outcomes, regardless of the choice of matching function. Second, the seller-to-buyer ratio, output level and money demand increase as the matching function becomes more efficient in a log-supermodular sense. I also consider an extension with endogenous search intensity and show that search intensity and trade volume always decrease in the nominal interest rate.

Keywords: directed search; money; labor; monotone comparative statics

JEL Classification: C60, D83, E40, J64