Prices and the Velocity of Money in Search Equilibrium

A monetary search model with match specific preferences and traded quantities is analyzed to assess how aggregate output, the price level and the velocity of money are affected by improvements in transaction versus productive technologies. The latter implies a systematic decline in prices and no prediction for monetary velocity, the former is ambiguous with respect to co-movements of output and prices and implies systematic increases in velocity. These predictions are common to price posting and bargained versions but at the micro level, the equilibrium patterns of trade are very different. Welfare is ambiguous with respect to the choice of the pricing mechanism.