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The emergence of money: a dynamic analysis

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  • Maurizio Iacopetta

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

This paper studies the role of liquidity in triggering the emergence of money in a Kiyotaki-Wright economy. A novel method computes the dynamic Nash equilibria of the economy by setting up an iteration of the agents' profile of (pure) strategies and of the distribution of commodities across agents. The analysis shows that the evolving state of liquidity can spark the acceptance of a high-cost-storage commodity as money or cause the disappearance of a commodity money. It also reveals the existence of multiple dynamic equilibria with pure strategies. Several simulations clarify how history and the coordination of beliefs matter for the selection of a particular equilibrium.

Suggested Citation

  • Maurizio Iacopetta, 2019. "The emergence of money: a dynamic analysis," SciencePo Working papers Main hal-03403573, HAL.
    • Handle: RePEc:hal:spmain:hal-03403573
    DOI: 10.1017/S1365100517000815
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03403573
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    References listed on IDEAS

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    Cited by:

    1. Mattia Di Russo & Zakaria Babutsidze & Célia da Costa Pereira & Maurizio Iacopetta & Andrea G. B. Tettamanzi, 2022. "Agent-Based Modeling for Studying the Spontaneous Emergence of Money," Post-Print hal-03913561, HAL.
    2. Eduardo Ferraciolli & Tanya Araújo, 2023. "Agent-based Modeling and the Sociology of Money: a Framework for the Study of Coordination and Plurality," Working Papers REM 2023/0285, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

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    Keywords

    Money; Strategies; Simulations;
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