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| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | On the Friedman Rule in Search Models with Divisible Money |
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| Institution | University of Zurich |
| Series Name | Working paper series / Institute for Empirical Research in Economics |
| Number | No. 155 |
| ISSN | 1424-0459 |
| Date | 2003 |
| Abstract Text | "with Divisible Money *nAleksander Berentsen†nEconomics Department (WWZ), University of Basel, SwitzerlandnGuillaume Rocheteau‡nSchool of Economics, Australian National University, AustralianApril 14th, 2003nAbstractnThis paper studies the validity of the Friedman rule in a search model with divisi-blenmoney and divisible goods where the terms of trades are determined endogenously.nWe show that ex post bargaining generates a holdup problem similar to the one em-phasizednin the labour-market literature. Buyers cannot obtain the full return that annadditional unit of money provides to the match, which makes the purchasing power ofnmoney ine .ciently low in equilibrium. Consequently, even though the Friedman rulenmaximizes the purchasing power of money, it fails to generate the first-best allocationnof resources unless buyers have all the bargaining power." |
| Official URL | http://www.econ.uzh.ch/wp.html |
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