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Gresham's Law in a Lemons Market for Assets

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Author Info
S. Rao Aiyagari

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Abstract

The authors describe a simple environment in which assets of varying qualities may be used for transactions and consumption. The quality of an asset is known to the seller, but not to the buyer. This feature generates a negative relationship between the transactions velocities of assets and their rates of return. They also discuss several versions of Gresham's Law that hold in this environment.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 22 (1989)
Issue (Month): 3 (August)
Pages: 686-97
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Handle: RePEc:cje:issued:v:22:y:1989:i:3:p:686-97

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  1. Steve Williamson & Randall Wright, 1991. "Barter and monetary exchange under private information," Staff Report 141, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  2. Francois R. Velde & Warren E. Weber & Randall Wright, 1997. "A model of commodity money, with applications to Gresham's Law and the debasement puzzle," Working Paper Series, Macroeconomic Issues WP-97-12, Federal Reserve Bank of Chicago. [Downloadable!]
    Other versions:
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