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Fiat Exchange in Finite Economies

Author

Listed:
  • Dan Kovenock

    (Krannert School of Management, Purdue University, 1310 Krannert Building, West Lafayette, IN 47907.)

Abstract

The state of the art of rendering fiat money valuable is either to impose a boundary condition or to make the boundary condition unimportant through an infinite sequence of markets so as to circumvent backward induction. We show fiat exchange may nevertheless arise in finite economies if agents have incomplete information about their relative position in the trade cycle or when the barter and autarky equilibria of the one-shot trading round support a monetary equilibrium with repeated trades. Copyright 2002, Oxford University Press.

Suggested Citation

  • Dan Kovenock, 2002. "Fiat Exchange in Finite Economies," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 147-157, April.
    • Handle: RePEc:oup:ecinqu:v:40:y:2002:i:2:p:147-157
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    Cited by:

    1. Huber, Jürgen & Shubik, Martin & Sunder, Shyam, 2014. "Sufficiency of an outside bank and a default penalty to support the value of fiat money: Experimental evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 317-337.
    2. Pavel Ciaian & Miroslava Rajcaniova & d’Artis Kancs, 2016. "The economics of BitCoin price formation," Applied Economics, Taylor & Francis Journals, vol. 48(19), pages 1799-1815, April.
    3. Mack Ott & John A. Tatom, 2016. "Government Finance and the Demand for Money—The Relation between Taxation and the Acceptability of Fiat Money," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(1), pages 53-77, February.
    4. Tatom, John & Ott, Mack, 2006. "Money and Taxes: The Relationship Between Financial Sector Development and Taxation," MPRA Paper 4117, University Library of Munich, Germany.
    5. Gabriele Camera & Dror Goldberg & Avi WeissBar-Ilan, 2020. "Endogenous Market Formation and Monetary Trade: An Experiment," Journal of the European Economic Association, European Economic Association, vol. 18(3), pages 1553-1588.
    6. Pavel Ciaian & Miroslava Rajcaniova & d’Artis Kancs, 2016. "The digital agenda of virtual currencies: Can BitCoin become a global currency?," Information Systems and e-Business Management, Springer, vol. 14(4), pages 883-919, November.
    7. Davis, Douglas & Korenok, Oleg & Norman, Peter & Sultanum, Bruno & Wright, Randall, 2022. "Playing with money," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 1221-1239.
    8. Janet Hua Jiang & Peter Norman & Daniela Puzzello & Bruno Sultanum & Randall Wright, 2024. "Is Money Essential? An Experimental Approach," Journal of Political Economy, University of Chicago Press, vol. 132(9), pages 2972-2998.
    9. Deck, Cary A., 2004. "Avoiding hyperinflation: Evidence from a laboratory economy," Journal of Macroeconomics, Elsevier, vol. 26(1), pages 147-170, March.
    10. Robinson, W.T. & Min, S., 1998. "Is the First to Market the First to fail?: Empirical Evidence for Manufacturing Business," Purdue University Economics Working Papers 1115, Purdue University, Department of Economics.
    11. Rod Garratt & Maarten van Oordt, 2019. "Systemic Privacy as a Public Good: A Case for Electronic Cash," Staff Working Papers 19-24, Bank of Canada.
    12. Camera, Gabriele & Vesely, Filip, 2007. "Trading horizons and the value of money," European Economic Review, Elsevier, vol. 51(7), pages 1751-1767, October.
    13. Deck, Cary A. & McCabe, Kevin A. & Porter, David P., 2006. "Why stable fiat money hyperinflates: Results from an experimental economy," Journal of Economic Behavior & Organization, Elsevier, vol. 61(3), pages 471-486, November.
    14. Maria Bigoni & Gabriele Camera & Marco Casari, 2019. "Cooperation among strangers with and without a monetary system," Working Papers 19-01, Chapman University, Economic Science Institute.
    15. Georgios Papadopoulos, 2013. "Money and value: a synthesis of the state theory of money and original institutional economics," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 6(2), May.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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