Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and...

Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and...

Why do some sellers set prices in nominal terms that do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption. Here it is a result. We use search theory, with two consequences: prices are set in dollars since money is the medium of exchange; and...

Arguably the most difficult question in macroeconomics is: why do individuals set prices in nominal terms that do not respond to changes in the aggregate price level? Of course some must respond, or the aggregate does not change, but many prices seem sticky in the short run. In popular macro...

Why do some sellers set nominal prices that apparently do not respond to changes in the aggregate price level? In many models, prices are sticky by assumption; here it is a result. We use search theory, with two consequences: prices are set in dollars, since money is the medium of exchange; and...

In this paper we construct a two-country search monetary model to determine the nominal exchange rate between two fiat monies. Our model imposes natural restrictions on agents' opportunities for arbitrage. These restrictions bind when the gross growth rates of the two currency stocks exceed the...

In this paper we construct a two-country search model to determine the nominal exchange rate between two fiat monies. Our model allows agents to use any currency to trade for goods in all countries. However, search frictions restrict agents<92> opportunities for instantaneous arbitrage, and hence...</92>