On Money as a Substitute for Perfect Recall
AbstractIn environments with no commitment and with a need for intertemporal trade, bounded recall is shown to be a sufficient friction for a receipt system (fiat money) to lead to improved allocations in an otherwise frictionless Walrasian model. The absence of other frictions makes price determination tractable, thus the model may be used for quantitative monetary policy experiments. Some issues regarding the divisibility of money are also discussed.
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Date of creation: 27 Feb 2001
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money; memory; competitive equilibrium;
Find related papers by JEL classification:
- E - Macroeconomics and Monetary Economics
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-05-02 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
- Harold L. Cole & Narayana R. Kocherlakota, 2000.
"Finite memory and imperfect monitoring,"
604, Federal Reserve Bank of Minneapolis.
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