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Limited monitoring and the essentiality of money

Listed author(s):
  • Araujo, Luis
  • Camargo, Braz

Monetary theory emphasizes that imperfect monitoring is necessary for money to be essential, that is, for money to achieve socially desirable allocations. Little is known about how limited monitoring must be if money is to be essential, though. Understanding sufficient conditions for the essentiality of money is important since monitoring is a natural way in which credit is introduced in monetary models. In this paper, we show that money can fail to be essential even if monitoring is quite limited. This indicates that one must be careful when introducing monitoring in monetary models to allow for the coexistence of money and credit.

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File URL: http://www.sciencedirect.com/science/article/pii/S0304406815000208
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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 58 (2015)
Issue (Month): C ()
Pages: 32-37

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Handle: RePEc:eee:mateco:v:58:y:2015:i:c:p:32-37
DOI: 10.1016/j.jmateco.2015.03.004
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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