Abstract
We review a class of equilibrium search (matching) models that can be used to study the trading process and develop a theory of money as a medium of exchange. Developing such a theory is one of the longest-standing issues in economics, and search-based models provide a natural framework in which to formalize venerable stories about money facilitating trade by avoiding the double coincidence of wants problem in pure barter. The approach provides a compelling microfoundation for monetary theory: it is based on sound economic thinking going back to the classical economists, brought up to date with modern and rigorous methods.
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
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Wright, R. (2008). Search-and-Matching Models of Monetary Exchange. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1941-1
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DOI: https://doi.org/10.1057/978-1-349-95121-5_1941-1
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