Monetary equilibrium with decentralized trade and learning
AbstractThis paper analyzes the stability of monetary regimes in an economy where fiat money isendogenously created by the government, information about its value is imperfect, and learningis decentralized. We show that monetary stability depends crucially on the speed of informationtransmission in the economy. Our model generates a dynamic on the acceptability of fiat moneythat resembles historical accounts of the rise and eventual collapse of overissued paper money.It also provides an explanation of the fact that, despite its obvious advantages, the widespreaduse of fiat money is only a recent development.
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Bibliographic InfoPaper provided by Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil) in its series Textos para discussão with number 222.
Date of creation: 25 Jun 2010
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Other versions of this item:
- Luis Araujo & Braz Camargo, 2005. "Monetary Equilibrium with Decentralized Trade and Learning," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 20051, University of Western Ontario, Department of Economics.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E00 - Macroeconomics and Monetary Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-10 (All new papers)
- NEP-CBA-2010-07-10 (Central Banking)
- NEP-DGE-2010-07-10 (Dynamic General Equilibrium)
- NEP-MON-2010-07-10 (Monetary Economics)
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