A Tractable Model of Monetary Exchange with Ex-Post Heterogeneity

67 Pages Posted: 18 May 2015 Last revised: 16 May 2021

See all articles by Guillaume Rocheteau

Guillaume Rocheteau

Federal Reserve Bank of Cleveland; National University of Singapore (NUS)

Pierre-Olivier Weill

University of California, Los Angeles; National Bureau of Economic Research (NBER)

Tsz-Nga Wong

Washington University in St Louis

Multiple version iconThere are 2 versions of this paper

Date Written: May 2015

Abstract

We construct a continuous-time, pure currency economy with the following three key features. First, our modelled economy incorporates idiosyncratic uncertainty—households receive infrequent and random opportunities of lumpy consumption—and displays an endogenous, non-degenerate distribution of money holdings. Second, the model is tractable: properties of equilibria can be obtained analytically, and equilibria can be solved in closed form in a variety of cases. Third, it admits as a special, limiting case the quasi-linear economy of Lagos and Wright (2005) and Rocheteau and Wright (2005). We use our modeled economy to obtain new insights into the effects of anticipated inflation on individual spending behavior, the social benefits and output effects of inflationary transfer schemes, and transitional dynamics following unanticipated monetary shocks.

Suggested Citation

Rocheteau, Guillaume and Weill, Pierre-Olivier and Wong, Tsz-Nga, A Tractable Model of Monetary Exchange with Ex-Post Heterogeneity (May 2015). NBER Working Paper No. w21179, Available at SSRN: https://ssrn.com/abstract=2607367

Guillaume Rocheteau (Contact Author)

Federal Reserve Bank of Cleveland ( email )

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National University of Singapore (NUS) ( email )

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Singapore, 119228
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Pierre-Olivier Weill

University of California, Los Angeles ( email )

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Los Angeles, CA 90095-1477
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National Bureau of Economic Research (NBER)

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Tsz-Nga Wong

Washington University in St Louis ( email )

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St. Louis, MO 63130
United States

HOME PAGE: http://sites.google.com/site/tszngawong/

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