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A Walrasian theory of commodity money: Paradoxical results

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Abstract

The objective of this note is to analyze some implications of the model of commodity money described in Banerjee and Maskin (1996) which may seem paradoxical. In order to do this, we incorporate a general production cost structure into the model. We focus on two different results. First, the existence of technologies that make counterfeiting a commodity more difficult may exclude it from being used as medium of exchange. Second, allocative distortions due to problems of asymmetric information may become larger in the presence of such technologies.

Suggested Citation

  • Xavier Cuadras, 2000. "A Walrasian theory of commodity money: Paradoxical results," Economics Working Papers 480, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:480
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    Cited by:

    1. Giuseppe Mastromatteo & Luigi Ventura, 2007. "The origin of money: A survey of the contemporary literature," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(2), pages 195-224, June.

    More about this item

    Keywords

    Money; lemons;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - 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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