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

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

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.

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