The Short-Run Effects of Unanticipated Monetary Shocks under Distinct Trading Mechanisms

Luis Araujo, Michigan State University and Sao Paulo School of Economics
Andrei Shevchenko, Michigan State University

Citation: Araujo, L. and Shevchenko, A. (2018). The Short-Run Effects of Unanticipated Monetary Shocks under Distinct Trading Mechanisms. Russian Journal of Money and Finance, 77(3), рр. 76-88.
doi:10.31477/rjmf.201803.76

Abstract
We unveil the existence of a trade-of between efficiency and information transmission in a decentralized economy subject to a monetary shock. If the objective is to maximize information transmission, then the optimal trading protocol is inherently inefficient. If, instead, the objective is to maximize efficiency, then the optimal trading protocol is necessarily uninformative. 

Keywords: monetary uncertainty, search, information transmission, trading protocols
JEL Codes: E40, D82, D83

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