Economic Theory

, Volume 3, Issue 2, pp 297–314 | Cite as

More on money as a medium of exchange

  • Timothy J. Kehoe
  • Nobuhiro Kiyotaki
  • Randall Wright
Research Articles


We extend the analysis of Kiyotaki and Wright, who study economies where the commodities that serve as media of exchange (or, commodity money) are determined endogenously. Kiyotaki and Wright consider only steady-state, pure-strategy equilibria; here we allow dynamic and mixed-strategy equilibria. We demonstrate that symmetric, steady-state equilibria in mixed-strategies always exist, while sometimes no such equilibria exist in pure-strategies. We prove that the number of symmetric steady-state equilibria is generically finite. We also show, however, that for some parameter values there exists a continuum of dynamic equilibria. Further, some equilibria display cycles.


Economic Theory Dynamic Equilibrium Commodity Money 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Aiyagari, S. R., Wallace, N.: Existence of steady states with positive consumption in the Kiyotaki-Wright model. Rev. Econ. Stud.58, 901–916 (1991)Google Scholar
  2. Aiyagari, S. R., Wallace, N.: Fiat money in the Kiyotaki —Wright model. Econ. Theory2, 447–464 (1992)Google Scholar
  3. Azariadis, C., Guesnerie, R.: Sunspots and cycles. Rev. Econ. Stud.53, 725–738 (1986)Google Scholar
  4. Balasko, Y., Cass, D., Shell, K.: Existence of competitive equilibrium in a general overlapping generations model. J. Econ. Theory23, 307–322 (1980)Google Scholar
  5. Benhabib, J., Day, R. H.: A characterization of erratic dynamics in the overlapping generations model. J. Econ. Dyn. Control4, 37–55 (1982)Google Scholar
  6. van Damme, E.: Refinements of the Nash Equilibrium Concept. Lect. Notes Econ. Math. Syst.219, Berlin: Springer 1983Google Scholar
  7. Gintis, H.: Money in general equilibrium. Manuscript, University of Massachusetts, Amherst 1989Google Scholar
  8. Grandmont, J.-M.: On endogenous competitive business cycles. Econometrica53, 995–1043 (1985)Google Scholar
  9. Guillemin, V., Pollack, A.: Differential topology. Englewood Cliffs: Prentice-Hall 1974Google Scholar
  10. Harsanyi, J. C.: Oddness of the number of equilibrium points: a new proof. Int. J. Game Theory2, 235–250 (1973)Google Scholar
  11. Hirsch, M. W.: Differential topology. New York: Springer 1976Google Scholar
  12. Irwin, M. C.: Smooth dynamical systems. New York: Academic Press 1980Google Scholar
  13. Jovanovic, B., Rosenthal, R. W.: Anonymous sequential games. J. Math. Econ.17, 77–87 (1988)Google Scholar
  14. Kehoe, T. J.: Multiplicity of equilibria and comparative statics. Quart. J. Econ.100, 119–147 (1985)Google Scholar
  15. Kehoe, T. J., Levine, D. K.: Regularity in overlapping generations exchange economies. J. Math. Econ.13, 69–93 (1984)Google Scholar
  16. Kehoe, T. J., Levine, D. K.: Comparative statics and perfect foresight in infinite horizon models. Econometrica53, 433–453 (1985)Google Scholar
  17. Kiyotaki, N., Wright, R.: On money as a medium exchange. J. Polit. Econ.97, 927–954 (1989)Google Scholar
  18. Mas-Colell, A.: The theory of general economic equilibrium: a differentiable approach. Cambridge: Cambridge University Press 1985Google Scholar

Copyright information

© Springer-Verlag 1993

Authors and Affiliations

  • Timothy J. Kehoe
    • 1
    • 2
  • Nobuhiro Kiyotaki
    • 1
    • 2
  • Randall Wright
    • 2
    • 3
  1. 1.Department of EconomicsUniversity of MinnesotaMinneapolisUSA
  2. 2.Research DepartmentFederal Reserve Bank of MinneapolisMinneapolisUSA
  3. 3.Department of EconomicsUniversity of PennsylvaniaPhiladelphiaUSA

Personalised recommendations