Money distribution with intermediation
Teles, Caio Augusto Colnago
Monetary Theory | Intermediation | Heterogeneous Agents | Mechanism Design | Moeda | Intermediação (Finanças)
This pap er analyzes the distribution of money holdings in a commo dity money search-based mo del with intermediation. Intro ducing heterogeneity of costs to the Kiyotaki
e Wright ( 1989 ) mo del, Cavalcanti e Puzzello ( 2010) gives rise to a non-degenerated
distribution of money. We extend further this mo del intro ducing intermediation in the
trading pro cess. We show that the distribution of money matters for savings decisions.
This gives rises to a xed p oint problem for the saving function that di cults nding
the optimal solution. Through some examples, we show that this friction shrinks the
distribution of money. In contrast to the Cavalcanti e Puzzello ( 2010 ) mo del, the
optimal solution may not present the entire surplus going to the consumer. At the end
of the pap er, we present a strong result, for a su cient large numb er of intermediaries
the distribution of money is degenerated.