Optimal Money Creation in a Random Matching Model: Some Planned Numerical Results

Abstract:

We describe plans for computing optimal steady states in a version of the Shi (1995) and Trejos-Wright (1995) random matching model with a large finite set of money holdings, [0; 1;…;B]. The optima are over how the gains from trade are divided between buyers and sellers based on their money holdings and over parameters of the class of money transfer schemes described in Wallace (2013); namely, transfers of the form max[0; 0 + 1m], where m is the post- trade money held by a person and 1 > 0. The conjecture to be explored is that the nature of optimal policy, even its direction in the sense of the sign of 0, is parameter dependent. Unfortunately, there are as yet no results.