Endogenous Matching and Money with Random Consumption Preferences
30 Pages Posted: 13 Apr 2014 Last revised: 21 Aug 2014
Date Written: April 10, 2014
Current money matching models employ either random matching or endogenous matching processes, both of which oversimplify the problem. We maintain that although most economic interactions are intentional, randomness still exists in consumption preferences. We offer an endogenous matching model of money with random consumption preferences. Our model preserves the intentionality of economic interactions while leaving scope for chance. We compare the potential monetary and nonmonetary equilibria to other endogenous matching and random matching models. We then consider the effects of government transaction policy and find that, consistent with earlier studies, government policy can prevent nonmonetary equilibria and create monetary equilibria.
Keywords: Money matching, Random matching, Endogenous matching, Monetary equilibrium, Monetary policy
JEL Classification: C78, E41, E42, E50
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