A BEJM Advances article.

Abstract

A probabilistic version of lump-sum money creation is studied in a random matching model with indivisible money and individual holdings bounded at 2 units. Sufficient conditions are obtained for an ex ante optimum from among implementable steady states to involve lump-sum creation of money. The role of that creation is to change the distribution of money holdings to permit more trade to occur. Beneficial money creation is impossible in a version with a 1 unit upper bound on individual holdings, but can almost certainly happen for all higher bounds.

Submitted: June 27, 2000 · Accepted: August 18, 2000 · Published: February 27, 2001

Originally published in Advances in Macroeconomics.

Recommended Citation

Deviatov, Alexei and Wallace, Neil (2001) "Another Example in which Lump-sum Money Creation is Beneficial," Advances in Macroeconomics: Vol. 1 : Iss. 1, Article 1.
Available at: http://www.bepress.com/bejm/advances/vol1/iss1/art1