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Money and Storage in a Differential Information Economy

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  • Huggett, Mark
  • Krasa, Stefan

Abstract

Is the use of fiat money essential in any efficient organization of exchange? We investigate this question in economies that are generalizations of the Townsend (1980) turnpike model that include limited commitment and differential information. We show that in the Townsend turnpike model fiat money is not essential unless there is limited commitment. Furthermore, fiat money has no role whenever there is storage with positive returns. In the presence of differential information fiat money is essential in overcoming incentive problems. This is the case even if there is storage with positive returns.

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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 8 (1996)
Issue (Month): 2 (August)
Pages: 191-210

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Handle: RePEc:spr:joecth:v:8:y:1996:i:2:p:191-210

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Cited by:
  1. Narayana R. Kocherlakota & Neil Wallace, 1997. "Optimal allocations with incomplete record-keeping and no commitment," Working Papers 578, Federal Reserve Bank of Minneapolis.
  2. Boel, Paola & Camera, Gabriele, 2004. "Efficient Monetary Allocations and the Illiquidity of Bonds," Purdue University Economics Working Papers 1171, Purdue University, Department of Economics.
  3. Wallace, Neil, 2000. "A model of the liquidity structure based on asset indivisibility," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 55-68, February.
  4. Camera, Gabriele & Vesely, Filip, 2007. "Trading horizons and the value of money," European Economic Review, Elsevier, vol. 51(7), pages 1751-1767, October.
  5. de O. Cavalcanti, Ricardo & Puzzello, Daniela, 2009. "Stationarity without Degeneracy in a Model of Commodity Money," MPRA Paper 17125, University Library of Munich, Germany.
  6. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
  7. Aliprantis, C. D. & Camera, G. & Puzzelo, D., 2004. "A Random Matching Theory," Purdue University Economics Working Papers 1168, Purdue University, Department of Economics.
  8. Charalambos Aliprantis & Gabriele Camera & Daniela Puzzello, 2006. "Matching and anonymity," Economic Theory, Springer, vol. 29(2), pages 415-432, October.
  9. Kocherlakota, Narayana R., 2003. "Societal benefits of illiquid bonds," Journal of Economic Theory, Elsevier, vol. 108(2), pages 179-193, February.
  10. Ricardo de O. Cavalcanti & Neil Wallace, 1999. "A model of private bank-note issue," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 104-136, January.
  11. Rocheteau, Guillaume, 2011. "Payments and liquidity under adverse selection," Journal of Monetary Economics, Elsevier, vol. 58(3), pages 191-205.
  12. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
  13. David C. Mills, Jr, 2004. "Mechanism Design and the Role of Enforcement in Freeman's Model of Payments," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 219-236, january.
  14. Neil Wallace, 1997. "Absence-of-double-coincidence models of money: a progress report," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-20.
  15. D. Aliprantis, C. & Camera, G. & Puzzello, D., 2007. "Anonymous markets and monetary trading," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1905-1928, October.
  16. Narayana R. Kocherlakota, 2000. "Societal benefits of nominal bonds," Staff Report 275, Federal Reserve Bank of Minneapolis.

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