We study an infinite-horizon economy with two basic frictions that are typical in monetary models. First, agents’ trading paths cross at most once due to pairwise trade and other meeting obstacles. Second, actions must be compatible with individual incentives due to commitment and enforcement...

We develop a general procedure to construct pairwise meeting processes characterized by two features. First, in each period the process maximizes the number of matches in the population. Second, over time agents meet everybody else exactly once. We call this type of meetings "absolute...

Adams Smith presented the notion of the labor commanded by a commodity in the marketplace. Much of what we think and we know regarding Smith's value measure and its role in his larger system must be jettisoned. That alone qualifies this new view as deserving of the most careful inspection, and...

We develop the theoretical underpinnings of pairwise random matching mechanisms. We formalize the mechanics of matching, and study the links between properties of the different mechanisms and trade frictions. A particular emphasis is placed on providing exact mappings between matching...

We present a new proof of the interiority of the policy function based on the Inada conditions. It is based on supporting properties of concave functions.

In this study we offer a new approach to proving the differentiability of the value function, which complements and extends the literature on dynamic programming. This result is then applied to the analysis of equilibrium in the recent class of monetary economies developed in [13]. For this type...

This work introduces a rigorous set-theoretic foundation of bilateral matching mechanisms and studies their properties in a systematic manner. By providing a unified framework to study bilateral matching mechanisms, we formalize how different spatial/informational constraints can be implemented...

We construct a monetary economy with heterogeneity in discounting and consumption risk. Agents can insure against this risk with both money and nominal government bonds, but all trades must be monetized. We demonstrate that a deflationary policy a la Friedman cannot sustain the efficient...

The welfare cost of anticipated inflation is quantified in a calibrated model of the U.S. economy that exhibits tractable equilibrium dispersion in wealth and earnings. Inflation does not generate large losses in societal welfare, yet its impact varies noticeably across segments of society...