Aggregate Demand Management in Search Equilibrium

  title={Aggregate Demand Management in Search Equilibrium},
  author={Peter A. Diamond},
  journal={Journal of Political Economy},
  pages={881 - 894}
  • P. Diamond
  • Published 1982
  • Economics
  • Journal of Political Economy
Equilibrium is analyzed for a simple barter model with identical risk-neutral agents where trade is coordinated by a stochastic matching process. It is shown that there are multiple steady-state rational expectations equilibria, with all non-corner solution equilibria inefficient. This implies that an economy with this type of trade friction does not have a unique natural rate of unemployment. 
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