TY - JOUR
T1 - Decentralizing constrained-efficient allocations in the Lagos–Wright pure currency economy
AU - Bajaj, Ayushi
AU - Hu, Tai Wei
AU - Rocheteau, Guillaume
AU - Silva, Mario Rafael
N1 - Publisher copyright:
© 2016 Published by Elsevier Inc.
PY - 2017/1
Y1 - 2017/1
N2 - This paper offers two ways to decentralize the constrained-efficient allocation of the Lagos–Wright (2005) pure currency economy. The first way has divisible money, take-it-or-leave-it offers by buyers, and a transfer scheme financed by money creation. If agents are sufficiently patient, the first best is achieved for finite money growth rates. If agents are impatient, the equilibrium allocation approaches the constrained-efficient allocation asymptotically as the money growth rate tends to infinity. The second way has indivisible money, take-it-or-leave-it offers by buyers, and no government intervention. We discuss the strict implementation of constrained-efficient allocations and the applicability of our scheme to economies with Lucas trees, endogenous participation, match-specific heterogeneity, and sequential competitive markets.
AB - This paper offers two ways to decentralize the constrained-efficient allocation of the Lagos–Wright (2005) pure currency economy. The first way has divisible money, take-it-or-leave-it offers by buyers, and a transfer scheme financed by money creation. If agents are sufficiently patient, the first best is achieved for finite money growth rates. If agents are impatient, the equilibrium allocation approaches the constrained-efficient allocation asymptotically as the money growth rate tends to infinity. The second way has indivisible money, take-it-or-leave-it offers by buyers, and no government intervention. We discuss the strict implementation of constrained-efficient allocations and the applicability of our scheme to economies with Lucas trees, endogenous participation, match-specific heterogeneity, and sequential competitive markets.
KW - Money
KW - Divisibility
KW - Implementation
UR - https://www.scopus.com/inward/record.uri?eid=2-s2.0-84993981941&doi=10.1016%2fj.jet.2016.09.011&partnerID=40&md5=abdc8599cb483c1759afbf4abd75467a
U2 - 10.1016/j.jet.2016.09.011
DO - 10.1016/j.jet.2016.09.011
M3 - Journal article
SN - 0022-0531
VL - 167
SP - 1
EP - 13
JO - Journal of Economic Theory
JF - Journal of Economic Theory
ER -