A monetary theory with non-degenerate distributions

Guido Menzio, Shouyong Shi, Hongfei Sun

    Research output: Contribution to journalArticlepeer-review


    We construct and analyze a tractable search model of money with a non-degenerate distribution of money holdings. Analytical tractability comes from modeling decentralized exchange as directed search, which makes the monetary steady state block recursive. By adapting lattice-theoretic techniques, we characterize individuals' policy and value functions, and show that these functions satisfy the standard conditions of optimization. We prove that a unique monetary steady state exists and provide conditions under which the steady-state distribution of buyers over money balances is non-degenerate. Moreover, we analyze the properties of this distribution.

    Original languageEnglish (US)
    Pages (from-to)2266-2312
    Number of pages47
    JournalJournal of Economic Theory
    Issue number6
    StatePublished - Nov 2013


    • Distribution
    • Lattice-theoretic
    • Money
    • Search

    ASJC Scopus subject areas

    • Economics and Econometrics


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