The Role of Money in Double Coincidence Environments
AbstractThis paper studies the role of money in asymmetric double coincidence of real wants environments where in each meeting each agent is a consumer of the other agent's production. Traders who meet at random finance their purchases through current production, sale of divisible money, or both. It is shown that in the absence of valued money if traders have asymmetric tastes for each other's good, they produce and exchange socially inefficient quantities. With valued money, however, traders exchange efficient quantities if the asymmetry of tastes is not too large. It is also shown that terms of trades in the monetary economy are strictly better than those in the corresponding barter economy, that the Friedman rule holds, and that the allocation of resources in the monetary economy converges to the allocation in the barter economy as the growth rate of the money supply is increased.
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Bibliographic InfoPaper provided by Université de Lausanne, Faculté des HEC, DEEP in its series Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) with number 00.18.
Length: 36 pages
Date of creation: Jul 2000
Date of revision:
Publication status: Published in International Economic Review, (title: "Money and the Gains from Trade") vol. 44 (1), Feb. 2003, pp. 263-297
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Postal: Université de Lausanne, Faculté des HEC, DEEP, Internef, CH-1015 Lausanne
Phone: ++41 21 692.33.64
Fax: ++41 21 692.33.05
Web page: http://www.hec.unil.ch/deep/publications/cahiers/series
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money; double coincidence; bargaining; search;
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- E00 - Macroeconomics and Monetary Economics - - General - - - General
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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