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One or two monies?

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  • Dong, Mei
  • Jiang, Janet Hua

Abstract

The set of incentive-feasible allocations is examined in a dynamic quasi-linear environment where agents lack commitment and have private information over their idiosyncratic characteristics. When record-keeping is available, the first-best allocation is implementable in a set of sufficiently patient economies. When record-keeping is limited to one money, this set is strictly smaller--except when private information is absent. When record-keeping is expanded, but limited to two monies, the set of economies for which the first-best is implementable corresponds to that of record-keeping, even when private information is present. We further demonstrate that two monies are a perfect substitute for record-keeping.

Suggested Citation

  • Dong, Mei & Jiang, Janet Hua, 2010. "One or two monies?," Journal of Monetary Economics, Elsevier, vol. 57(4), pages 439-450, May.
  • Handle: RePEc:eee:moneco:v:57:y:2010:i:4:p:439-450
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    More about this item

    Keywords

    Record-keeping Money Private information Limited commitment Mechanism design;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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