Stochastic Tastes and Money in a Neo-Keynesian Economy

Zurich IEER Working Paper No. 88

21 Pages Posted: 17 Oct 2001

See all articles by Klaus Reiner Schenk-Hoppé

Klaus Reiner Schenk-Hoppé

University of Manchester - Department of Economics; Norwegian School of Economics (NHH) - Department of Finance

Date Written: August 2001

Abstract

This paper studies a monetary economy with heterogenous agents in which trade takes place in a centralized market. Each agent is a potential producer and consumer of a service (or perishable good) but has stochastic preferences that determines his taste for the good in each period in time. Money serves as a medium of exchange as well as a store of value. We prove existence of stationary fix-price equilibria with exogenously given quantity of money in which transactions can take place at non-Walrasian prices. Precautionary savings, under- and oversupply, dynamics on money holdings, and the effects of changes in the quantity of money are discussed.

Keywords: Microeconomic models of money, stochastic preferences, fix-price equilibria, rationing, dynamics of money distributions

JEL Classification: D51, E41, E52

Suggested Citation

Schenk-Hoppé, Klaus Reiner, Stochastic Tastes and Money in a Neo-Keynesian Economy (August 2001). Zurich IEER Working Paper No. 88, Available at SSRN: https://ssrn.com/abstract=287568 or http://dx.doi.org/10.2139/ssrn.287568

Klaus Reiner Schenk-Hoppé (Contact Author)

University of Manchester - Department of Economics ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

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