Monetary Equilibrium with Decentralized Trade and Learning
This paper analyzes the stability of monetary regimes in an economy where fiat money is endogenously created by the government, information about its value is imperfect, and learning is decentralized. We show that monetary stability depends crucially on the speed of information transmission in the economy. Our model generates a dynamic on the acceptability of fiat money that resembles historical accounts of the rise and eventual collapse of overissued paper money. It also provides an explanation of the fact that, despite its obvious advantages, the widespread use of fiat money is only a recent development.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2|
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Katzman, Brett & Kennan, John & Wallace, Neil, 2003.
"Output and price level effects of monetary uncertainty in a matching model,"
Journal of Economic Theory,
Elsevier, vol. 108(2), pages 217-255, February.
- Katzman,B. & Kennan,J. & Wallace,N., 2001. "Output and price level effects of monetary uncertainty in a matching model," Working papers 1, Wisconsin Madison - Social Systems.
- Banks, Jeffrey S & Sundaram, Rangarajan K, 1992.
Econometric Society, vol. 60(5), pages 1071-96, September.
- Kiyotaki, Nobuhiro & Wright, Randall, 1993. "A Search-Theoretic Approach to Monetary Economics," American Economic Review, American Economic Association, vol. 83(1), pages 63-77, March.
- Ritter, Joseph A, 1995.
"The Transition from Barter to Fiat Money,"
American Economic Review,
American Economic Association, vol. 85(1), pages 134-49, March.
- Friedman, Milton & Schwartz, Anna J., 1986.
"Has government any role in money?,"
Journal of Monetary Economics,
Elsevier, vol. 17(1), pages 37-62, January.
- Dutta, Prajit K. & Majumdar, Mukul K. & Sundaram, Rangarajan K., 1994. "Parametric continuity in dynamic programming problems," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1069-1092, November.
- Araujo, Luis & Shevchenko, Andrei, 2006. "Price dispersion, information and learning," Journal of Monetary Economics, Elsevier, vol. 53(6), pages 1197-1223, September.
- Wallace, Neil, 1997. "Short-Run and Long-Run Effects of Changes in Money in a Random-Matching Model," Journal of Political Economy, University of Chicago Press, vol. 105(6), pages 1293-1307, December.
- Wolinsky, Asher, 1987.
"Information Revelation in a Market with Pairwise Meetings,"
The Warwick Economics Research Paper Series (TWERPS)
284, University of Warwick, Department of Economics.
- Wolinsky, Asher, 1990. "Information Revelation in a Market with Pairwise Meetings," Econometrica, Econometric Society, vol. 58(1), pages 1-23, January.
- Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-54, August.
- King, Robert G., 1983. "On the economics of private money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 127-158.
- Andrei Shevchenko & Luis Araujo, 2004. "Prices, Information and Learning," 2004 Meeting Papers 118, Society for Economic Dynamics.
When requesting a correction, please mention this item's handle: RePEc:uwo:uwowop:20051. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.