Money, Barter, and the Optimality of Legal Restrictions
AbstractWe examine a decentralized monetary economy in which households can use a means of exchange (barter or gold) other than fiat money. The alternative means of exchange may drive out money even if monetary exchange Pareto dominates. Legal restrictions prohibiting other means of exchange may therefore be necessary. With stochastic preferences, households may use barter to supplement monetary purchases when they have an unexpectedly high demand. However, this may drive down the value of money (in all states) so low that households are again better off with fiat money alone. The paper provides both stochastic and nonstochastic examples in which eliminating markets for goods or assets that compete with fiat money improves welfare. Copyright 1991 by University of Chicago Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 99 (1991)
Issue (Month): 4 (August)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JPE/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Hayashi, Fumio & Matsui, Akihiko, 1996.
"A Model of Fiat Money and Barter,"
Journal of Economic Theory,
Elsevier, vol. 68(1), pages 111-132, January.
- Chen, Shikuan & Kao, Yi-Cheng, 2010. "Money, barter, and consumption interdependence," Economics Letters, Elsevier, vol. 106(2), pages 119-121, February.
- Akihiko Matsui, 1998.
"Strong Currency and Weak Currency,"
CIRJE-F-14, CIRJE, Faculty of Economics, University of Tokyo.
- Matsui, Akihiko, 1998. "Strong Currency and Weak Currency," Journal of the Japanese and International Economies, Elsevier, vol. 12(4), pages 305-333, December.
- Engineer, Merwan & Shouying Shi, 1998. "Asymmetry, imperfectly transferable utility, and the role of fiat money in improving terms of trade," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 153-183, February.
- Wilfredo Toledo, 2006. "El dinero en los modelos macroeconómicos," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(15), pages 97-116, July-Dece.
- Shi, Shouyong, 1999. "Money, capital, and redistributive effects of monetary policies," Journal of Economic Dynamics and Control, Elsevier, vol. 23(4), pages 565-590, February.
- Engineer, Merwan, 2000. "Currency transactions costs and competing fiat currencies," Journal of International Economics, Elsevier, vol. 52(1), pages 113-136, October.
- Marvasti, A. & Smyth, David J., 1999. "The effect of barter on the demand for money: an empirical analysis," Economics Letters, Elsevier, vol. 64(1), pages 73-80, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.