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Aggregate Demand Management in Search Equilibrium
Peter A. Diamond
Journal of Political Economy
Vol. 90, No. 5 (Oct., 1982), pp. 881-894
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/1837124
Page Count: 14
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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.
Journal of Political Economy © 1982 The University of Chicago Press