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Coordination in the use of money

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  • Araujo, Luis
  • Guimaraes, Bernardo

Abstract

Fundamental models of money, while explicit about the frictions that render money essential, are silent on how agents actually coordinate in its use. This paper studies this coordination problem, providing an endogenous map between the primitives of the environment and the beliefs on the acceptability of money. We show that an increase in the frequency of trade meetings, besides its direct impact on payoffs, facilitates coordination. In particular, for a large enough frequency of trade meetings, agents always coordinate in the use of money.

Suggested Citation

  • Araujo, Luis & Guimaraes, Bernardo, 2014. "Coordination in the use of money," Journal of Monetary Economics, Elsevier, vol. 64(C), pages 38-46.
  • Handle: RePEc:eee:moneco:v:64:y:2014:i:c:p:38-46
    DOI: 10.1016/j.jmoneco.2014.01.009
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    References listed on IDEAS

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    Cited by:

    1. Bernardo Guimaraes & Luis Araujo, 2012. "The effect of options on coordination," 2012 Meeting Papers 474, Society for Economic Dynamics.
    2. Luis Araujo & Bernardo Guimaraes, 2017. "A Coordination Approach to the Essentiality of Money," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 14-24, March.
    3. Camera, Gabriele & Gioffré, Alessandro, 2014. "Game-theoretic foundations of monetary equilibrium," Journal of Monetary Economics, Elsevier, vol. 63(C), pages 51-63.
    4. Araujo, Luis & Guimaraes, Bernardo, 2015. "Intertemporal coordination with delay options," Journal of Economic Theory, Elsevier, vol. 157(C), pages 793-810.
    5. Pidong Huang & Manjong Lee, 2015. "Coordination on Use of Non-deferred Electronic Payment Instruments," Korean Economic Review, Korean Economic Association, vol. 31, pages 5-24.

    More about this item

    Keywords

    Money; Beliefs; Coordination;

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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