In this note we extend the search-based monetary DSGE model studied in Aruoba and Schorfheide (2010) and introduce liquid capital claims. More specifically, buyers in the decentralized market can use a fraction of their capital stock holdings in addition to money to acquire goods from sellers. We show that if liquid capital is a small fraction of the overall capital then money and capital claims can co-exist as a medium of exchange in the decentralized market.
An Estimated Search-Based Monetary DSGE Model with Liquid CapitalS. Boragan Aruoba and Frank Schorfheide ,