Essays of search -theoretic models of money

The dissertation consists of three essays on search monetary economy. The first essay is entitled "Search, Information and Policy Analysis in a Monetary Economy with Uncertainty in Commodity Quality". Ordinarily, one would expect more higher quality goods would be produced when buyers obtain more information about the true qualities of the goods they are going to buy. In this essay, I develop a search model to study the effects of information acquisition on quality choice and welfare. Surprisingly, there may exist inefficiency associated with decentralized information acquisition behavior. The equilibrium value of the probability of producing high quality goods may be lower when buyers have more information on goods quality. I also conduct a policy analysis by introducing governments into the economy as a big agent. It is found that certain commitment among government agents can lead the economy to a desirable equilibrium and save the resource spending on acquiring information.;The second essay is entitled "Inventory, Search and the Variability in the Velocity of Money". A dynamic equilibrium model is developed in this essay to examine the variability in the velocity of money. The prominent feature of the model is the presence of costly search in both goods and labor markets. Incorporating money growth shocks and productivity shocks, the model is calibrated to the US time series data. In contrast to other dynamic equilibrium models, e.g., Hodrick et al. (1991), the model generates sufficient variability of the velocity of money that is comparable to the sample value. This success stems largely from a novel propagation mechanism and, more broadly, from non-Walrasian exchange process of the model. In particular, monetary shocks create an inventory effects that propagates the shock into output and makes the velocity of money vary. The model also generates reasonable correlations among variables.;The third essay is entitled "Search, Inflation Tax, International Currency and Currency Exchange". In this essay I introduce the government's budgetary policy, which allows the monetary authority to extract seigniorage revenue from agents holding the national currency, into a two-country-two currency model of the world economy to investigate the impact of the police (the risk of confiscation can be regarded as the inflation tax associated with holding the currency) on the circulation areas of both currencies and welfare levels of both countries. Findings in this essay are intuitive. The country with its national currency accepted universally can take this as an advantage. The government of this country can raise its national welfare by moderately increasing the inflation tax on its national currency. Meanwhile, the country with its national currency accepted only domestically is in a passive position in the world economy. The government of this country has to keep the inflation tax low enough to maintain the domestic circulation of its national currency. Direct currency exchange may occur when government agents meet domestic agents more often than meet foreign agents. Agents holding their national currencies may trade their holdings for foreign currencies to avoid higher risk of confiscation. This mechanism is different from those in the literature.