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Imperfect monitoring is necessary for essentiality of money

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  • Hiroki Fukai

    (Kyushu University)

Abstract

Fiat money, an intrinsically useless object, is said to be essential if some good allocations are achieved with it but not without it. In this paper, it is shown that imperfect monitoring is necessary for money to be essential in a large class of economic environments. This provides a guide for the construction of models in which monetary trade achieves good outcomes.

Suggested Citation

  • Hiroki Fukai, 2019. "Imperfect monitoring is necessary for essentiality of money," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 19-26, May.
    • Handle: RePEc:spr:etbull:v:7:y:2019:i:1:d:10.1007_s40505-018-0140-0
    DOI: 10.1007/s40505-018-0140-0
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    References listed on IDEAS

    as
    1. Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-1344, December.
    2. Araujo, Luis & Camargo, Braz, 2015. "Limited monitoring and the essentiality of money," Journal of Mathematical Economics, Elsevier, vol. 58(C), pages 32-37.
    3. Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
    4. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
    5. Awaya, Yu & Fukai, Hiroki, 2017. "A Note On “Money Is Memory“: A Counterexample," Macroeconomic Dynamics, Cambridge University Press, vol. 21(2), pages 545-553, March.
    6. Ostroy, Joseph M, 1973. "The Informational Efficiency of Monetary Exchange," American Economic Review, American Economic Association, vol. 63(4), pages 597-610, September.
    7. Araujo, Luis, 2004. "Social norms and money," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 241-256, March.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Money; Imperfect monitoring; Essentiality of money;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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