Absence-of-Double-Coincidence Models of Money: A Progress Report

Abstract

A particular model built on the absence-of-double-coincidence idea is described. Specifications show that there is nothing inherently extreme about models built on the absence-of-double-coincidence idea. Thus, it seems that a suitable remedy for the schizophrenia that has for so long afflicted monetary economics is now available. Economists are now able to formulate a general class of models consistent with the long-held belief that the use of a medium of exchange is the result of real frictions that give rise to absence-of-double-coincidence problems. It is demonstrated that a particular model in this class can account for the 2 main challenges facing monetary theory: the disparate long-run and short-run effects of changes in the quantity of money and the coexistence of money and assets with higher rates of return.