A search equilibrium approach to monetary theory and policy.
This dissertation develops dynamic theoretical frameworks which explicitly incorporate a search-theoretic process of economic exchange into an operational theory of fiat money. The "search equilibrium" approach to trade frictions models the process of economic exchange as a costly activity which requires time and real resources. Thus, such an environment provides a natural role for fiat money in overcoming the classic "double coincidence of wants" problem associated with barter exchange. The dissertation is divided into four essays on the construction of search frameworks for monetary theory and their application to monetary policy. First, the conventional wisdom that inflation causes individuals to optimally incur the costs of shortening the period between transactions is confirmed. This result linking inflation and optimal search effort or "intensity" provides a central theme for the dissertation.
|Main Author:||Li, Victor.|