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AbstractMultiplicity of equilibria naturally obtains in search models of money with price posting: buyers' money holdings depend on posted prices, which, in turn, depend on buyers' money holdings. I show that this multiplicity of equilibria exists in general even when money is replaced with a dividend-bearing asset, as long as the asset is useful as a medium of exchange. If the fundamental value of the asset is sufficiently high, there is a unique equilibrium, in which the price of the asset equals its fundamental value. For lower fundamental values, there is a continuum of bubble equilibria, in which the price of the asset exceeds the fundamental value. For very low fundamental values, the equilibrium is again unique but the asset is not used as a medium of exchange. I characterize the set of symmetric and asymmetric bubble equilibria for both positive and negative fundamental values.

In the aftermath of the Great Recession, millions of Americans received extensions to their unemployment benefits – in some cases extending them to 99 weeks. At the end of 2013, these extended benefits expired, leading many to call on Congress to reauthorize their extension. But does extending unemployment benefits make sound economic sense? In new research, Stanislav Rabinovich and Kurt Mitman argue that the government was correct to rein in the duration of benefits. They write that reducing the duration of benefits helps the unemployed to find jobs faster, and leads to much less volatile unemployment.