directed matching and monetary exchange we develop a model of monetary exchange where as in the random matching literature agents trade bilaterally and not through centralized markets rather than assuming they match exogenously and at random however we determine who meets whom as part of the equilibrium we show how to formalize this process of directed matching in dynamic models with double coincidence problems and present several examples and applications that illustrate how the approach can be used in monetary theory some of our results are similar to those in the random matching literature others differ significantly

the distribution of money and prices in search equilibrium this article considers a search theoretic model of monetary exchange agents bargain over both the amount of money and the quantity of goods to be exchanged in bilateral meetings determining endogenously the distributions of money and of prices i show that money is neutral if changes in the money supply are accomplished via proportional transfers however within the class of lump sum transfers an increase of the rate of monetary expansion tends to decrease the dispersion of wealth and prices and to improve welfare when inflation is low but when inflation is high enough the opposite effects occur

transmission cost allocation by cooperative games and coalition formation the allocation of costs of a transmission system to its users is still a pending problem in many electric sector market regulations this paper contributes with a new allocation method among the electric market participants both cooperation and competition are defined as the leading principles to fair solutions and efficient cost allocation the method is based mainly on the responsibility of the agents in the physical and economic use of the network their rational behavior the formation of coalitions and cooperative game theory resolution mechanisms the designed method is applicable to existing networks or to their expansion simulations are made with sample networks results conclude that adequate solutions are possible in a decentralized environment with open access to networks comparisons with traditional allocation systems are shown and cooperative game solutions compare better in economic and physical terms

anonymous markets and monetary trading abstract we study infinite horizon monetary economies characterized by trading frictions that originate from random pairwise meetings and commitment and enforcement limitations we prove that introducing occasional trade in centralized markets opens the door to an informal enforcement scheme that sustains a non monetary efficient allocation all is required is that trading partners be patient and their actions be observable we then present a matching environment in which trade may occur in large markets and yet agents trading paths cross at most once this allows the construction of models in which infinitely lived agents trade in competitive markets where money plays an essential role

liquidity constraints in a monetary economy this article presents a microfounded model of money with a consumption and an investment market we consider an economy in which only part of the investment returns can be pledged a liquidity constraint arises when the pledgeable part of the returns are not enough to pay for investment costs we show that when the liquidity constraint is binding agents may make a cash downpayment and money can perform two roles as a provider of liquidity services and exchange services the liquidity constraint constitutes a channel though which underinvestment occurs even at low inflation rates

learning by doing the technology gap and growth in contrast with other trade and growth theories in previous literature the author resents a growth theory of trade induced learning other things being equal two conditions are essential for trade induced learning first both exports and imports are equally important sources and are mutually reinforced in intensifying the learning process moreover the nature or characteristics of these traded goods also influence the effect of learning second trade openness is a prerequisite but not a sufficient condition for rapid growth with whom one trades one s trading partner is a key factor in determining trade induced technology spillover and hence in affecting enduring growth therefore this trade induced learning theory provides abundant and testable implications for the empirical study of trade and growth copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

general equilibrium with nonconvexities and money in a general equilibrium economy with nonconvexities there are sunspot equilibria with good welfare properties sunspots can ameliorate the effects of the nonconvexities for these economies we show that agents act as if they have quasi linear utility functions we use this result to construct a new model of monetary exchange along the lines of lagos and wright where trade occurs in both centralized and decentralized markets but instead of quasi linear preferences we assume general preferences but with indivisible labor this suggests that modern monetary theory is more robust than one might have thought it also constitutes progress on the classic problem of integrating monetary economics and general equilibrium theory

a rudimentary random matching model with divisible money and prices abstract we consider a version of kiyotaki and wright s monetary search model in which agents can hold arbitrary amounts of divisible money a continuum of stationary equilibria indexed by the aggregate real money stock exists with all trading occurring at a single price there is always a maximum level of the real money stock consistent with existence of such an equilibrium in the limit as trading becomes faster relative to discounting any real money stock becomes feasible in such an equilibrium in contrast to the original kiyotaki wright model higher equilibrium real money stocks unambiguously correspond to higher welfare in this costless production environment journal of economic literature classification numbers d51 e40

what does export diversification do for growth an econometric analysis it is frequently suggested that export diversification contributes to an acceleration of growth in developing countries horizontal export diversification into completely new export sectors may generate positive externalities on the rest of the economy as export oriented sectors gain from dynamic learning activities due to contacts with foreign purchasers and exposure to international competition vertical diversification out of primary into manufactured exports is also associated with growth since primary export sectors generally do not exhibit strong spillovers yet there have been remarkably few empirical investigations into the link between export diversification and growth this paper attempts to examine the hypothesis that export diversification is linked to economic growth via externalities of learning by doing and learning by exporting fostered by competition in world markets the diversification led growth hypothesis is tested by estimating an augmented cobb douglas production function on the bas

money credit and banking in monetary models where agents are subject to trading shocks there is typically an ex post inefficiency since some agents are holding idle balances while others are cash constrained this problem creates a role for financial intermediaries such as banks who accept nominal deposits and make nominal loans in general financial intermediation improves the allocation the gains in welfare come from the payment of interest on deposits and not from relaxing borrowers liquidity constraints we also demonstrate that when credit rationing occurs increasing the rate of inflation can be welfare improving

a uniqueness proof for monetary steady state abstract the framework in lagos and wright 2005 20 combining decentralized and centralized markets is used extensively in monetary economics much is known about that model but there is a loose end only under special assumptions about bargaining power or decentralized market preferences has it been shown that the monetary steady state is unique for general decentralized market utility and bargaining i prove uniqueness for generic parameters with fiat money and for all parameters with commodity money as a corollary i get monotone comparative statics

endogenous search price dispersion and welfare abstract this paper studies the welfare cost of inflation in a frictional monetary economy with endogenous consumer search equilibrium entails price dispersion where sellers compete for buyers by posting prices we identify three channels through which inflation affects welfare the real balance channel is the source of welfare loss its interaction with the price posting channel generates a welfare cost larger than lucas 2000 the search channel reduces the welfare cost by more than one half through general equilibrium effect the aggregate effect of these three channels on welfare is non monotonic additionally the welfare cost of inflation fluctuations is negligible

a tractable monetary model under general preferences this article studies an economy with both centralized and decentralized monetary exchanges under search frictions a degenerate asset distribution is featured under a broad class of preferences including for example constant return to scale constant elasticity of substitution cara and others from a range of macroeconomic literatures some novel applications impossible under quasi linear preferences for example endogenous growth are illustrated under this class of preferences this article finds that the welfare cost and growth loss of inflation can be much higher in these applications than previous estimates

manufactured exports and terms of trade of developing countries evidence from sri lanka terms of trade implications of diversification into manufactured exports in a traditional primary exporting country are examined in the light of the sri lankan experience over the past two decades the empirical analysis focuses on trends in both commodity and income terms of trade employing a methodology which takes care of the spurious regression problem the results suggest that contrary to the new terms of trade pessimism export diversification has brought about significant terms of trade gains for the sri lankan economy overall the study casts doubt on the robustness of results coming from analyses of price trends in aggregate manufactured exports and calls for systematic time profile analyses of the countries which have achieved significant export diversification in order to inform the policy debate

existence of a monetary steady state in a matching model indivisible money abstract existence of a monetary steady state is established for a random matching model with divisible goods indivisible money an arbitrary bound on individual money holdings and take it or leave it offers by consumers the background environment is that in papers by shi and by trejos and wright the monetary steady state shown to exist has nice properties the value function defined on money holdings is strictly increasing and strictly concave and the measure over money holdings has full support

a divisible search model of fiat money this paper extends the kiyotaki wright search model of fiat money to allow for divisible money and goods the extension allows me to examine the standard issues in monetary economics such as the neutrality and superneutrality of money by severing the artificial link in the kiyotaki wright model between the money supply and the number of money holders it is shown that money is neutral but not superneutral money growth generates a trading opportunity effect it changes the fraction of different agents in the economy and hence changes the probability with which agents have a successful match in addition money growth has a negative effect on the real money balance that is familiar in walrasian monetary models the balance of the two effects can imply a positive optimal money growth rate

search money and prices it is well known that models in which money is used as a medium of exchange to lubricate trading frictions display multiplicity of equilibria i show that the amount of activity varies as the value of money differs across these equilibria when production opportunities involve random fixed costs when money has high value trade is more profitable therefore there will be more agents engaged in trade relative to equilibria in which money has lower value the higher activity equilibria display higher production not only because more is produced and exchanged per transaction but also because more transactions occur per period this diamond style result is obtained without increasing returns in the matching technology

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

a monetary minsky model of the great moderation and the great recession abstract steve keen s model of minsky s financial instability hypothesis keen 1995 displayed qualitative characteristics that matched the real macroeconomic and income distributional outcomes of the preceding and subsequent fifteen years a period of economic volatility followed by a period of moderation leading to a rise of instability once more and a serious economic crisis this paper extends that model to build a strictly monetary macroeconomic model which can generate the monetary as well as the real phenomena manifested by both the great recession and the great moderation

social norms and money abstract in an economy where there is no double coincidence of wants and without public record keeping of past transactions money is usually seen as the only mechanism that can support exchange in this paper we show that as long as the population is finite and agents are sufficiently patient a social norm establishing gift exchange can substitute for money however for a given discount factor population growth eventually leads to the breakdown of the social norm additionally increases in the degree of specialization in the economy can also undermine the social norm by contrast monetary equilibrium exists independent of the population size we conclude that money is essential as a medium of exchange when the population is large

money and credit redux do we need both money and credit in models with explicit roles for payment instruments we show the answer is no if credit is easy money is useless if credit is tight money can be essential but then credit is irrelevant and changes in debt limits are neutral real balances respond endogenously to leave total liquidity constant this is true for exogenous or endogenous policy and debt limits secured or unsecured credit and fairly general preferences and pricing mechanisms while we also show how to overturn some results the benchmark model suggests credit conditions matter less than some people think

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

whither monetary economics i argue that monetary economics should be pursued by applying implementation theory to models which contain explicit frictions that make money essential the argument has two parts first i argue that models in which real balances are assumed to be productive models with money in utility or production functions or with cash in advance constraints contain hidden inconsistencies second i argue that the approach advocated is capable of providing new insights about some of the main issues in monetary economics the effects of monetary shocks the welfare cost of inflation and the roles of inside and outside money

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

money and price dispersion we relax restrictions on the storage technology in a prototypical monetary search model to study price dispersion in this case buyers and sellers enter matches with potentially different willingness to trade across the distribution of possible bilateral matches prices generally will differ even though agents have identical preferences and technologies we provide existence conditions for a particularly simple equilibrium pattern of exchange we prove that in the limiting case where search frictions are eliminated equilibrium prices are uniform we also show that a higher initial money stock can raise the average price level and increase price dispersion

on the multiplicity of monetary equilibria green zhou meets lagos wright abstract green and zhou relax the assumption made in early search based models of monetary exchange of indivisible money their paper and various extensions make much technical progress and derive some interesting substantive results in particular they show there is an indeterminacy of steady state monetary equilibria we reconsider this result in the framework of lagos and wright which is more tractable we show that a similar multiplicity arises and is much easier to derive and understand we also compare the results to those in related nonmonetary models and discuss how they depend on details including the number of agents and the timing

money and capital as competing media of exchange we construct a model where capital competes with fiat money as a medium of exchange and we establish conditions on fundamentals under which fiat money can be both valued and socially beneficial when the socially efficient stock of capital is too low to provide the liquidity agents need they overaccumulate productive assets to use as media of exchange when this is the case there exists a monetary equilibrium that dominates the nonmonetary one in terms of welfare under the friedman rule fiat money provides just enough liquidity so that agents choose to accumulate the same capital stock a social planner would

money bargaining and risk sharing we investigate the dual role of money as a self insurance device and a means of payment when perfect risk sharing is not possible and when the two roles of money are disentangled we use a variant of lagos wright 2005 where agents face a risk in the centralized market cm in the decentralized market dm money s main role is as a means of payment while in the cm it is as a self insurance device we show that state contingent inflation rates can improve agents ability to self insure in the cm thereby improving the terms of trade in the dm we then characterize the optimal monetary policy

dynamic monetary equilibrium in a random matching economy this article concerns an infinite horizon economy where trade must occur pairwise using a double auction mechanism and where fiat money overcomes lack of double coincidence of wants traders are anonymous and lack market power goods are divisible and perishable and are consumed at every date preferences are defined by utility stream overtaking money is divisible and not subject to inventory constraints the evolution of individual and economywide money holdings distributions is characterized there is a welfare ordered continuum of single price equilibria reflecting indeterminacy of the price level rather than of relative prices

optimal monetary and fiscal policies in a search theoretic model of monetary exchange abstract search models of monetary exchange commonly assume that terms of trade in anonymous markets are determined via nash bargaining which generally causes monetary equilibrium to be inefficient bargaining frictions add to the classical intertemporal distortion present in most monetary models whereby agents work today to obtain cash that can be used only in future transactions in this paper we study the properties of optimal fiscal and monetary policy within the framework of lagos and wright 2005 we show that fiscal policy can be implemented to alleviate underproduction while money is still essential if lump sum monetary transfers are available a production subsidy can restore the efficiency of monetary equilibria the friedman rule belongs to the optimal policy set but higher inflation rates are also possible when lump sum monetary transfers are not available equilibrium allocations are generally not first best nevertheless fiscal policy still results in substantial welfare gains money can be extracted from circulation via a sales tax on decentralized market activities and the friedman rule is only optimal if the buyer has relatively low bargaining power

transmission loss allocation a comparison of different practical algorithms a pool operated electricity market based on hourly auctions usually neglects network constraints and network losses while applying its market clearing mechanism this mechanism determines the accepted and nonaccepted energy bids as well as the hourly market clearing prices as a result ex post procedures are needed to resolve network congestions and to allocate transmission losses to generators and demands this paper focuses on transmission loss allocation procedures and provides a detailed comparison of four alternative algorithms 1 pro rata pr 2 marginal allocation 3 unsubsidized marginal allocation and 4 proportional sharing a case study based on the ieee rts is provided different load scenarios covering a whole year are analyzed finally conclusions and recommendations are stated

liquidity and asset market dynamics this study analyzes economies with an essential role for liquid assets in the exchange process the model can generate multiple stationary equilibria across which asset prices market participation capitalization output and welfare are positively related it can also generate a variety of nonstationary equilibria even when fundamentals are deterministic and time invariant including periodic chaotic and stochastic sunspot equilibria with recurrent market crashes some equilibria have asset price trajectories that resemble bubbles growing and bursting endogenous private and public liquidity is also introduced sometimes it is efficient to provide enough liquid assets to satiate demand other times it is not

degreasing the wheels of finance can there be too much trading in financial markets we construct a dynamic general equilibrium model where agents face idiosyncratic liquidity shocks a financial market allows agents to adjust their portfolio of liquid and illiquid assets in response to these shocks the optimal policy is to restrict access to this market because portfolio choices exhibit a pecuniary externality agents do not take into account that by holding more of the liquid asset they not only acquire additional insurance against these liquidity shocks but also marginally increase the value of the liquid asset which improves insurance for other market participants

stages of diversification this paper studies the evolution of sectoral concentration in relation to the level of per capita income we show that various measures of sectoral concentration follow a u shaped pattern across a wide variety of data sources countries first diversify in the sense that economic activity is spread more equally across sectors but there exists relatively late in the development process a point at which they start specializing again we discuss this finding in light of existing theories of trade and growth which generally predict a monotonic relationship between income and diversification

complex losses allocation to generators and loads based on circuit theory and aumann shapley method this paper presents a new method to allocate active and reactive losses simultaneously to generators and loads the allocation is calculated for each transmission branch identifying and quantifying the buses responsibilities in losses this is a two step process in the first step generators are modeled as current injections and loads as constant admittances in order to determine generator participations in losses in the second step loads are modeled as current sources and generators as constant admittances in order to determine load participations in losses the aumann shapley and circuit theories are used to calculate the participation of each real and imaginary current component considering them as independent players in the complex losses allocation game the properties of the aumann shapley method ensure equitable allocation and recovery of the total active and reactive losses counter flow cross subsidy and negative allocation issues are discussed numerical results are presented and discussed to demonstrate the applicability of the proposed method

marriage markets and money a coasian theory of household formation this article integrates search based models of marriage and money we think about households as organizations the way coase thinks about firms as alternatives to markets that become more attractive when transactions costs increase in the model individuals consume market and home produced goods and home production is facilitated by marriage market frictions including taxes search and bargaining problems increase the marriage propensity the inflation tax encourages marriage because being single is cash intensive microdata confirm singles use cash more than married people we use macrodata over many countries to investigate how marriage responds to inflation taxation and other variables

transmission loss unbundling and allocation under pool electricity markets this paper presents a methodology based on the circuit theories for unbundling and allocation of transmission losses among the participants of a pool based electricity market starting from a known operation point and using the basic network equations without additional assumptions an expression of the branch losses based on nodal current injections is derived since the power flow equations and circuit theories are satisfied the methodology turns explicit in a natural way separating the losses at each system branch and assigning the responsibility to the respective market participants it means that the loss allocation of each branch which is produced by each generator and consumer is obtained extensions and strategies considering unsubsidized and predefined proportion based loss allocation as well as issues related with the allocation fairness and transparency are also included comparisons with previous methods and validation tests of the proposed method are reported by using the ieee reliability test system

a new look at the benefits of diversification lessons from central america recent trends of export diversification in central america may lower foreign exchange earnings instability there four countries costa rica el salvador honduras and guatemala are analysed across a twenty year period the paper uses united nations commodity trade statistics to explain why costa rica and honduras have enjoyed greater earnings stability in recent years despite the fact that honduras has not greatly diversified its export products and markets despite the growth of new agricultural and manufacturing goods traditional primary products still dominate the countries export portfolios specific products within each of the four broad product category groups contribute to the varied country outcomes summary statistics from the united nations panel data suggest newer agricultural exports have not stabilized guatemalan and salvadoran export earnings while honduras has enjoyed relatively stable banana export revenues and costa rica has benefited from the smooth flow of microelectronic product

a new look at the effects of export instability on investment and growth abstract this paper is concerned with the effects of export instability on investment and growth it is shown that past cross sectional empirical studies on the effects of export instability either in prices or in value terms used an incorrect measure of instability that does not properly take account of the share of exports in gdp using a new instability index and a broad set of conditioning variables it is shown that export instability was positively associated with investment but negatively associated with growth in a large sample of countries during the period from the early 1970s to the mid 1980s

a unified framework for monetary theory and policy analysis search theoretic models of monetary exchange are based on explicit descriptions of the frictions that make money essential however tractable versions of these models typically make strong assumptions that render them ill suited for monetary policy analysis we propose a new framework based on explicit micro foundations within which macro policy can be studied the framework is analytically tractable and easily quantifiable we calibrate the model to standard observations and use it to measure the cost of inflation we find that going from 10 percent to 0 percent inflation is worth between 3 and 5 percent of consumption much higher than previous estimates

inflation and unemployment in the long run we study the long run relation between money measured by inflation or interest rates and unemployment we first document in the data a positive relation between these variables at low frequencies we then develop a framework where unemployment and money are both modeled using microfoundations based on search and bargaining theory providing a unified theory for analyzing labor and goods markets the calibrated model shows that money can account for a sizable fraction of trends in unemployment we argue it matters qualitativelynand quantitatively whether one uses monetary theory based on search and bargaining or an alternative ad hoc specification

a weakly conditioned imputation of an impedance branch dissipation power in a sinusoidal steady state circuit how much of an impedance branch dissipation power should be assigned to each source the answer is the basis of electricity transmission pricing such as the pricing of line loss and line security due to thermal limit however it is difficult to obtain a unique and common consent answer because of the nonlinearity of power expression this paper presents two weakly conditioned imputation formulas respectively for dissipation active and reactive power to answer the question first a detailed form of shapley value formula and three weak conditions are proposed on this basis the two imputation formulas are then derived and proved mathematically the imputation formulas are explicitly in terms of source currents voltages thus analytic and easy to compute they possess eight mathematical and economic features that lay a good foundation for electricity transmission pricing the two imputation formulas are also extended to actual power systems where trades are conducted in mwh mvarh instead of amperes volts numerical examples illustrate their computing process and features

money and prices a model of search and bargaining abstract this paper makes commodities divisible and incorporates bargaining into the search theoretic model of money to determine the purchasing power of money or price it is shown that two monetary equilibria always coexist where fiat money is universally accepted the two equilibria differ in price output welfare and the velocity of money sunspot monetary equilibria exist in which money is universally accepted in all states of the economy multiplicity has novel implications on the effectiveness of currency substitution and exchange market intervention journal of economic literature classification numbers c78 e40

dynamics cycles and sunspot equilibria in genuinely dynamic fundamentally disaggregative models of money abstract this paper pursues a line of cass and shell who advocate monetary models that are genuinely dynamic and fundamentally disaggregative and incorporate diversity among households and variety among commodities recent search theoretic models fit this description we show that like overlapping generations models search models generate interesting dynamic equilibria including cycles chaos and sunspot equilibria this helps us understand how alternative models are related and lends support to the notion that endogenous dynamics and uncertainty matter perhaps especially in monetary economies we also suggest such equilibria in search models may be more empirically relevant than in some other models

on the partition of transmission losses among generators due to the introduction of competition in the electrical power industry determining the percentage of transmission grid losses that should be attributed to each generator has become important usually this is accomplished by determining the percentage of each transmission branch losses that should be attributed to each generator using the aumann shapley theory this letter identifies the fairest way to share the nonseparable portion of losses amongst the generators the obtained result validates some approximations assumed in recent papers and contributes to strengthening circuit theory based methods

money is memory abstract this paper examines the sets of feasible allocations in a large class of economic environments in which commitment is impossible following myerson 8 the standard definition of feasibility is adapted to take account of the lack of commitment the environments feature either memory or money memory is defined as knowledge on the part of an agent of the full histories of all agents with whom he has had direct or indirect contact in the past money is defined as an object that does not enter utility or production functions and is available in fixed supply the main proposition is that any allocation that is feasible in an environment with money is also feasible in the same environment with memory depending on the environment the converse may or may not be true hence from a technological point of view money is equivalent to a primitive form of memory journal of economic literature classification numbers e40 c73 d82

money banking and monetary policy abstract an important function of banks is to issue liabilities like demand deposits that are relatively safe and liquid we introduce a risk of theft and a safe keeping role for banks into modern monetary theory this provides a general equilibrium framework for analyzing banking in historical and contemporary contexts the model can generate the concurrent circulation of cash and bank liabilities as media of exchange or inside and outside money it also yields novel policy implications for example negative nominal interest rates are feasible and for some parameters optimal for other parameters strictly positive nominal rates are optimal

export diversification what s behind the hump hy should export diversification be taken as a policy objective per se there are two reasons that it should not first according to ricardo countries should specialize not diversify second the heckscher ohlin model implies that export patterns are largely determined by endowments so if anything we should worry about factor accumulation not diversification yet export diversification is a constant preoccupation of policymakers in developing countries as de ferranti et al 2002 note a recurrent preoccupation of latin american policymakers is that their natural riches produce a highly concentrated structure of export revenues which then leads to economic volatility and lower growth p 38 the notion that export patterns are fully determined by endowments is of course naive the relationship of endowments trade and growth is a complex and imperfectly understood one intra industry trade models showed long ago that many factors other than endowments including market failures and policies can affect trade patterns more recently hausmann hwang and rodrik 2007 argued that export patterns can display path dependence in the presence of externalities

liquidity a new monetarist perspective this essay surveys the new monetarist approach to liquidity work in this literature strives for empirical and policy relevance plus rigorous foundations questions include what is liquidity is money essential in achieving desirable outcomes which objects can or should serve in this capacity when can asset prices differ from fundamentals what are the functions of commitment and collateral in credit markets how does money interact with credit and intermediation what can and should monetary policy do the research summarized emphasizes the micro structure of frictional transactions and studies how institutions like monetary exchange credit arrangements or intermediation facilitate the exchange process

money search and business cycles monetary models that specify explicit frictions to generate money demand have been developed over the last 20 years and have been used to address many questions in this article i investigate the short run properties of a particular model considering a number of versions based on some modeling choices all versions feature flexible prices i find that in many aspects both real and nominal the model resembles other more reduced form models some variations of the model come closer to matching some key nominal facts than a reduced form model the model also generates counter cyclical markups in line with the data

transmission loss allocation i single energy market this paper presents a new methodology for allocating transmission losses to the participants of a single energy market the proposed approach is based on the incremental transmission loss concept and is implemented through two models basic and extended in the basic model the total system losses are estimated through the linear dc load flow equations while the extended model uses the exact ac formulation the concept of center of losses is used a fictitious bus in the system network where all transactions are compensated for transmission losses both models provide a sharing of transmission losses among generators and loads based on a predefined proportion for instance 50 50 for each participant class some important aspects related with the allocation fairness and transparency are illustrated by numerical applications with the ieee reliability test system the extension of this methodology to interconnected energy markets is treated in a companion paper

multiplicity of monetary steady states abstract we investigate a monetary model in which the centralized market opens once but the decentralized markets open twice in each period we show that there may be multiple stationary equilibria

money and price posting under private information abstract we study price posting with undirected search in a search theoretic monetary model with divisible money and divisible goods ex ante homogeneous buyers experience match specific preference shocks in bilateral trades the shocks follow a continuous uniform distribution and the realizations of the shocks are private information we show that there exists a unique monetary equilibrium for generic values of the inflation rate in equilibrium each seller posts a continuous pricing schedule that exhibits quantity discounts buyers may spend nothing a fraction or all of their money holdings depending on their preference shock realizations inflation reduces the extent of non linear pricing the model captures the hot potato effect of inflation along both the extensive margin as an increase in the trading probability and the intensive margin as higher fractions of money being spent

open market operations abstract in an open market operation the central bank swaps currency for bonds we show how injecting money in this way is different from transfers the way policy is usually formulated the model captures liquidity explicitly by modeling the roles of assets in frictional exchange under various specifications for market structure and the acceptability or pledgeability of assets we discuss implications for the fisher and quantity equations the possibility of negative nominal yields liquidity traps and market segmentation when liquidity is endogenized using information theory multiple equilibria emerge with different policy predictions interest on reserves and quantitative easing are discussed