The New Palgrave Dictionary of Economics Online

We review a class of equilibrium search (matching) models that can be used to study the trading process and develop a theory of money as a medium of exchange. Developing such a theory is one of the longest-standing issues in economics, and search-based models provide a natural framework in which to formalize venerable stories about money facilitating trade by avoiding the double coincidence of wants problem in pure barter. The approach provides a compelling microfoundation for monetary theory: it is based on sound economic thinking going back to the classical economists, brought up to date with modern and rigorous methods.