Premium
On Complicated Dynamics in Simple Monetary Models
Author(s) -
HE CHAO,
WRIGHT RANDALL
Publication year - 2019
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12625
Subject(s) - simple (philosophy) , mathematical economics , market liquidity , economics , general equilibrium theory , dynamic stochastic general equilibrium , computer science , business cycle , dynamics (music) , econometrics , monetary policy , microeconomics , macroeconomics , philosophy , physics , epistemology , acoustics
We provide a complete characterization of stationary and nonstationary deterministic equilibria in search models of liquidity with indivisible assets. Two formulations are considered: the usual one with random search and bargaining; and a less common but arguably better one with directed search and posting. Also, we consider general meeting technologies. This is interesting because some results are easy with the particular technologies in previous studies but not in general. As is known, these models have equilibria where endogenous variables change over time as self‐fulfilling prophecies. More surprisingly, we prove there are no equilibria where they cycle in the long run.