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Technological role of fiat money

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    This article argues that fiat money’s only technological role in an economy is to act as societal memory: money allows people to credibly record some aspects of their transactions and make that record accessible to other people. This record-keeping role is demonstrated in the three standard paradigms of fiat money: the overlapping generations, turnpike, and search models. In these models, if a new economy is created by removing the money and replacing it only with a historical record of all transactions, known to everyone in the economy, then the original monetary allocation is still achievable as an equilibrium. ; This article is a less technical presentation of the ideas in the author’s study, “Money is Memory,” which is forthcoming in the Journal of Economic Theory. The article appears in the Minneapolis Fed’s Quarterly Review with the permission of Academic Press.

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    Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

    Volume (Year): (1998)
    Issue (Month): Sum ()
    Pages:

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    Handle: RePEc:fip:fedmqr:y:1998:i:sum:n:v.22no.3
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    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
    2. Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-44, December.
    3. S. Rao Aiyagari & Neil Wallace, 1991. "Existence of steady states with positive consumption in the Kiyotaki-Wright model," Working Papers 428, Federal Reserve Bank of Minneapolis.
    4. Nobuhiro Kiyotaki & Randall Wright, 1989. "A contribution to the pure theory of money," Staff Report 123, Federal Reserve Bank of Minneapolis.
    5. Ostroy, Joseph M, 1973. "The Informational Efficiency of Monetary Exchange," American Economic Review, American Economic Association, vol. 63(4), pages 597-610, September.
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