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Money as a medium of transaction in the overlapping generations model


  • Bruce D. Smith


A definition of a transactions medium is proposed. This is that a transactions medium permits the attainment of otherwise unattainable resource allocations. It is shown that by this definition money can be a transactions medium in a pure exchange, overlapping generations economy. It is also shown that money is a transaction medium only if there are informational asymmetries of a particular type. Finally, it is shown that the set of economies for which money is a transactions medium is not isolated, in a well-defined sense.

Suggested Citation

  • Bruce D. Smith, 1982. "Money as a medium of transaction in the overlapping generations model," Working Papers 216, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:216

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    References listed on IDEAS

    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 467-467.
    2. Milgrom, Paul, 1981. "An Axiomatic Characterization of Common Knowledge," Econometrica, Econometric Society, vol. 49(1), pages 219-222, January.
    3. Bruce Smith, 1986. "Limited Information, Money, and Competitive Equilibrium," Canadian Journal of Economics, Canadian Economics Association, vol. 19(4), pages 780-797, November.
    4. Guesnerie, Roger & Seade, Jesus, 1982. "Nonlinear pricing in a finite economy," Journal of Public Economics, Elsevier, vol. 17(2), pages 157-179, March.
    5. Stiglitz, Joseph E., 1982. "Self-selection and Pareto efficient taxation," Journal of Public Economics, Elsevier, vol. 17(2), pages 213-240, March.
    6. Wilson, Robert B, 1978. "Information, Efficiency, and the Core of an Economy," Econometrica, Econometric Society, vol. 46(4), pages 807-816, July.
    7. McCallum, Bennett T., 1983. "The role of overlapping-generations models in monetary economics," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 18(1), pages 9-44, January.
    8. Brunner, Karl & Meltzer, Allan H, 1971. "The Uses of Money: Money in the Theory of an Exchange Economy," American Economic Review, American Economic Association, vol. 61(5), pages 784-805, December.
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