Money and the Gain from Enduring Relationships in the Turnpike Model

35 Pages Posted: 13 Nov 2012

See all articles by Peter N. Ireland

Peter N. Ireland

Boston College - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 1994

Abstract

This paper presents a stochastic version of Townsend's turnpike model in which the aggregate endowment is distributed randomly between two sets of agents and in which agents of each type are allowed to remain at a trading post for multiple periods. Agents use money as a means of exchange when they meet as strangers but use private securities when they remain paired at the same trading post. Both welfare and the income velocity of money increase monotonically with the length of the trading session.

Suggested Citation

Ireland, Peter N., Money and the Gain from Enduring Relationships in the Turnpike Model (June 1, 1994). Federal Reserve Bank of Richmond Working Paper No. 94-7, Available at SSRN: https://ssrn.com/abstract=2123626 or http://dx.doi.org/10.2139/ssrn.2123626

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