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Credit, Money and Asset Equilibria with Indivisible Goods

Author

Listed:
  • Han Han

    (School of Economics Peking University)

  • Benoit Julien

    (UNSW Australia)

  • Asgerdur Petursdottir

    (University of Bath)

  • Liang Wang

    (University of Hawaii at Manoa)

Abstract
In a New Monetarist framework, we study the trade of indivisible goods under credit, divisible money and divisible asset in a frictional market. We show how indivisibility on the goods side, instead of the money or asset side, matters for equilibria. The bargaining solution generates a price that is independent of nominal interest rate, dividend value of the asset, or the number of active buyers carrying the asset for liquidity purposes. To reestablish this link, we consider price posting with competitive search. We derive conditions under which stationary equilibrium exists. With asset and bargaining, we find that for negative dividend value on the asset, multiple equilibria occur. Otherwise, in all possible combinations of liquidity and price mechanisms, including positive dividend value under asset, the equilibrium is unique or generically unique.

Suggested Citation

  • Han Han & Benoit Julien & Asgerdur Petursdottir & Liang Wang, 2016. "Credit, Money and Asset Equilibria with Indivisible Goods," Working Papers 201601, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:201601
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_16-01.pdf
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    References listed on IDEAS

    as
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    5. Jean, Kasie & Rabinovich, Stanislav & Wright, Randall, 2010. "On the multiplicity of monetary equilibria: Green-Zhou meets Lagos-Wright," Journal of Economic Theory, Elsevier, vol. 145(1), pages 392-401, January.
    6. Miguel Molico, 2006. "The Distribution Of Money And Prices In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 701-722, August.
    7. Dale T. Mortensen & Randall Wright, 2002. "Competitive Pricing and Efficiency in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 1-20, February.
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    Cited by:

    1. Lorenzo Carbonari & Fabrizio Mattesini & Robert J. Waldmann, 2023. "Inflation and Welfare in a Competitive Search Equilibrium with Asymmetric Information," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 717-746, June.
    2. Chao Gu & Han Han & Randall Wright, 2016. "The Effects of Monetary Policy and Other Announcements," Working Papers 1621, Department of Economics, University of Missouri.
    3. Athanasios Geromichalos & Kuk Mo Jung, 2019. "Monetary policy and efficiency in over-the-counter financial trade," Canadian Journal of Economics, Canadian Economics Association, vol. 52(4), pages 1699-1754, November.
    4. Baughman, Garth & Rabinovich, Stanislav, 2021. "Capacity choice, monetary trade, and the cost of inflation," European Economic Review, Elsevier, vol. 134(C).

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    More about this item

    Keywords

    Nash Bargaining; Competitive Search; Indivisibility; Multiplicity; Uniqueness;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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