Journal Article

Currency Exchange in a Random Search Model

Ruilin Zhou

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 64, issue 2, pages 289-310
Published in print April 1997 | ISSN: 0034-6527
Published online April 1997 | e-ISSN: 1467-937X | DOI:
Currency Exchange in a Random Search Model

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This paper investigates foreign exchange trading, a phenomenon that typically accompanies international trade. A search-theoretic general equilibrium approach is adopted to study a two-country, two-currency model. For some parameter values of the model, there exist some pure-strategy equilibria in which commodity-currency trade is conducted primarily through local currency and in which there is active currency-currency exchange. The coexistence of valued foreign currency and its local non-acceptability conforms largely with the country-specific cash-in-advance constraint that is often assumed exogenously in international finance literature.

Journal Article.  0 words. 

Subjects: Economics

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