Bargaining and the value of money |
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Authors: | S. Bora?an Aruoba Christopher Waller |
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Affiliation: | a University of Maryland, USA b Federal Reserve Bank of Cleveland, USA c University of Notre Dame, USA |
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Abstract: | Search models of monetary exchange have typically relied on Nash [1950. The bargaining problem. Econometrica 18, 155-162] bargaining, or strategic games that yield an equivalent outcome, to determine the terms of trade. By considering alternative axiomatic bargaining solutions in a search model with divisible money, we show that the properties of the bargaining solutions do matter both qualitatively and quantitatively for questions of first-degree importance in monetary economics such as: (i) the efficiency of monetary equilibrium; (ii) the optimality of the Friedman rule and (iii) the welfare cost of inflation. |
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Keywords: | C70 E40 |
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