Asset Dynamics, Liquidity, and Inequality in Decentralized Markets

15 Pages Posted: 5 Dec 2018

See all articles by Maurizio Iacopetta

Maurizio Iacopetta

OFCE (Centre de recherche en Economie de Sciences Po); SKEMA Business School - Sophia Antipolis Campus

Raoul Minetti

Michigan State University - Department of Economics

Date Written: January 2019

Abstract

The Kiyotaki and Wright model has exerted a considerable influence on the monetary search literature. We argue that the model also delivers important insights into a broader range of macroeconomic and development issues. The analysis studies how market frictions and the liquidity of assets affect the distribution of income. Experiments illustrate how the economy adjusts to shocks to asset returns and to the matching technology. They also deal with long‐run transition. An experiment interprets the reversal of fortune hypothesis as a situation in which an economy with a low‐return asset takes over a similar economy with a high‐return asset.

JEL Classification: C61, C63, E41, E27, D63

Suggested Citation

Iacopetta, Maurizio and Minetti, Raoul, Asset Dynamics, Liquidity, and Inequality in Decentralized Markets (January 2019). Economic Inquiry, Vol. 57, Issue 1, pp. 537-551, 2019, Available at SSRN: https://ssrn.com/abstract=3295895 or http://dx.doi.org/10.1111/ecin.12721

Maurizio Iacopetta (Contact Author)

OFCE (Centre de recherche en Economie de Sciences Po)

31 rue Croix des Petits Champs
75049 Paris Cedex 01
France

SKEMA Business School - Sophia Antipolis Campus ( email )

60 rue Dostoïevski
Sophia Antipolis, 06902
France

Raoul Minetti

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-355-7349 (Phone)
517-432-1068 (Fax)

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