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Price posting with directed search is a widely used trading mechanism. Coles and Eeckhout showed that if sellers are allowed to post prices contingent on realized demand instead of one price, then there is real market indeterminacy. In this article, we fit this contingent price-posting protocol into a monetary economy. We show that, as long as holding money is costly, there exists a unique equilibrium rather than a continuum. In this equilibrium sellers post a low price for when the buyer is alone, a high price for when several buyers show up, and buyers randomize between sellers and money holdings.

The relationship between unanticipated inflation and output has been a classic issue in macroeconomics. This paper studies the effects of monetary uncertainty on output in a competitive search environment where there is asymmetric information about monetary shocks. In such an environment, sellers post prices that are contingent on the realization of the shock, and buyers then direct their search towards the most attractive price. The paper proposes a new mechanism for real output effects of monetary shocks: when the realization of the monetary shock is privately observed by buyers, to induce truth-telling behavior, sellers offer more output when the economy experiences a positive monetary shock; otherwise, buyers have an incentive to lie about the state of the world in order to pay low prices. This contrasts with the centralized Walrasian market environment, where nominal shocks by themselves have no real effects.

Current Population Survey (CPS) data over the period from 1994 to 2008 show that inflation has a positive effect on the residual wage dispersion. To explain this phenomenon, we introduce uncoordinated job searches into a general equilibrium monetary search framework. Our model shows that the uncoordinated job searches by unemployed workers give rise to an equilibrium, where a firm is matched with zero, one, or multiple job applicants. The ex post difference in matching probabilities generates a two-point wage dispersion among identical workers, when the Mortensen rule is implemented in the wage-determination process. In our model, inflation positively influences the wage dispersion directly through its impact on firm's real profit and indirectly through the effect of inflation that spills over from the goods market to the labor market. With reasonable parameter values, the calibrated model can account for most of the observed responses of residual wage dispersion to inflation.

We study the behavior and macroeconomic impact of oligopolistic banks in a tractable environment with micro-foundations for money and banking. Our model features oligopolistic banks, which resembles the structure of the banking sector observed in most advanced economies. Banks interact strategically where they compete against each other in terms of the volume of loans to make. We …nd that it is welfare-maximizing to have the banking sector as oligopolistic, i.e., to have a small number of large banks. In addition, moderate in ‡ation improves welfare because it helps to ease congestion in the banking sector.

Inflation leads individuals to work harder to spend and not carry their money holdings. Two alternative margins have been used to model this effect: the extensive margin (the frequency of shopping per period) and the intensive margin (the average shopping time per trip). This paper investigates how inflation affects these two margins. It deviates from the previous literature by allowing individuals to vary both margins simultaneously. The analysis reveals that the impact of inflation on these two margins is determined by the interaction between the opportunity cost of carrying money and direct search costs.

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