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Vol. 92, No. 4
Posted 2010-07-01

Asset Prices, Liquidity, and Monetary Policy in the Search Theory of Money

by Ricardo Lagos

The author presents a search-based model in which money coexists with equity shares on a risky aggregate endowment. Agents can use equity as a means of payment, so shocks to equity prices translate into aggregate liquidity shocks that disrupt the mechanism of exchange.

— A revised version of this article was concomitantly published in Federal Reserve Bank of Minneapolis <em>Quarterly Review.</em>



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