Essays in monetary economics

On the emergence of monetary exchange. While in recent years economists have developed economic models showing how the use of money as a medium of exchange can be an equilibrium outcome, there has been almost no analysis of the dynamic process by which monetary exchange arises. In this chapter, I characterize circumstances under which agents endogenously choose to circulate a durable good as money due to the presence of technological progress. I find general conditions where if the durable good yields even an arbitrarily small flow utility, then there exists a unique equilibrium with the following properties: agents initially choose to remain in autarky, then begin to barter, and finally circulate the durable good as money in exchange for the consumption good. I also explore the timing of the advent of monetary exchange, studying how agents\u27 anticipation that monetary exchange will eventually occur affects its emergence at an earlier date through a process of backwards induction. Crime and money. In this chapter, I examine the implications of monetary theft in a random matching model of money where agents bargain over production quantities. I find that in equilibrium there is a unique price level and crime rate, where the presence and degree of criminal activity depend explicitly on the likelihood of getting caught, how unpleasant prison is, and the expected period of incarceration. Also, for interior crime rates (when agents take advantage of some but not all opportunities to steal) the price level is not sensitive to small changes in the quantity of money, rather the crime rate changes. For some parameter values crime cannot be eliminated by increasing the expected period of incarceration