Econometric Society 57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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ON THE MICRO-FOUNDATIONS OF MONEY: THE CAPITOL HILL BABY-SITTING CO-OP


Category: Economic Theory
Monetary Theory II
Tuesday 27th August 2002, 09:30 - 11:00, Room: 1.6
Session Chair(s): Andrew Levin, Federal Reserve Board, UNITED STATES and Christopher Erceg, Federal Reserve Board, UNITED STATES

Presenter(s): Vogt, Bodo

Co-Author(s): Hens, Thorsten and Schenk-Hoppe, Klaus Reiner

Keyword(s): micro foundations of money, optimal quantity of money

JEL(s): C73, C91, C92, E40, E41, E42

Abstract:

We suggest a new micro-foundation of money in which markets are well-organized but consumers' preferences are stochastic. In this model, we solve for stationary equilibria and show that there is an optimum quantity of money. The rational solution of our model is compared with actual behavior in a laboratory experiment. It turns out that the experiment gives support to our theoretical results.


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Paper Reference Number: 1700

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57th European Meeting
25th August 2002 - 28th August 2002, Venice, Italy

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