This article studies the role of money in environments where in each meeting there is a double coincidence of real wants. Traders who meet at random finance their purchases through current production, the sale of divisible money or both. It is shown that in the absence of valued money if traders...

Recent monetary models with explicit microfoundations are made tractable by assuming that agents have access to centralized markets after one round of decentralized trade. Given quasi-linear preferences, this makes the distribution of money degenerate-which keeps the models simple but precludes...

This article studies stationary and nonstationary distributions of money holdings in a random-matching model. The first part characterizes the stationary distributions of money holdings and derives the optimum quantity of money. The second part considers nonstationary distributions of the...

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...