Abstract
This note studies the trade of indivisible goods using credit or money in a frictional market. We show how indivisibility matters for monetary equilibrium under different assumptions about price determination. Bargaining generates a price and allocation that are independent of the nominal interest or inflation rate over some range. This is not the case with price posting and directed search. In either case, we provide conditions (the nominal rate cannot be too high) under which stationary monetary equilibrium exists, and we show it is unique or generically unique.
Original language | English |
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Pages (from-to) | 152-163 |
Number of pages | 12 |
Journal | Journal of Economic Theory |
Volume | 166 |
Early online date | 30 Aug 2016 |
DOIs | |
Publication status | Published - 1 Nov 2016 |
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Asgerdur Petursdottir
Person: Research & Teaching