Summary
I highlight the importance of distributional aspects of money divisibility by comparing a search-theoretic model with random transfers of indivisible money balances, to one with deterministic transfers of partially divisible balances. Randomization allows price flexibility, as if money were fully divisible. Partial divisibility does not, but allows money redistributions. An example of the relevance of such ‘extensive margin’ aspects of divisibility is provided.
I thank Dean Corbae and seminars participants at the Federal Reserve Bank of Richmond, University of Texas at Austin, Purdue University, the Midwest Macroeconomics Meetings, the Central Bank Institute of the Federal Reserve Bank of Cleveland, and the meetings of the Society for the Advancement of Economic Theory, where this work has been presented during the years 2002 and 2003.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Berentsen, A., Camera G., Waller C.: The Distribution of Money and Prices in an Equilibrium with Lotteries. Economic Theory (forthcoming) (2003)
Berentsen, A., Molico M., Wright, R.: Indivisibilities, Lotteries and Monetary Exchange. Journal of Economic Theory 107(1), 1–25 (2002), “
Berentsen, A., Rocheteau, G.: On the Efficiency of Monetary Exchange: How Divisibility of Money Matters. Journal of Monetary Economics 49, 1621–1650 (2002)
Camera G., Corbae, D.: Money and Price Dispersion. International Economic Review 40, 985–1008 (1999)
Green, E.J., Zhou, R.: Dynamic Monetary Equilibrium in a Random Matching Economy. Econometrica 70, 929–969 (2002)
Kiyotaki N., Wright R.: A Search-Theoretic Approach to Monetary Economics. American Economic Review 83, 63–77 (1993)
Ravikumar, B. Wallace, N.: A Benefit of Uniform Currency. Manuscript, University of Iowa (2001)
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2006 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Camera, G. (2006). Distributional aspects of the divisibility of money. An example. In: Aliprantis, C.D., Yannelis, N.C., Camera, G. (eds) Recent Developments on Money and Finance. Studies in Economic Theory, vol 24. Springer, Berlin, Heidelberg. https://doi.org/10.1007/3-540-29500-3_8
Download citation
DOI: https://doi.org/10.1007/3-540-29500-3_8
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-27803-0
Online ISBN: 978-3-540-29500-6
eBook Packages: Business and EconomicsEconomics and Finance (R0)