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On Money as a Substitute for Perfect Recall

Author

Listed:
  • Ted Temzelides

    (The University of Iowa)

  • Jialin Yu

    (Princeton University)

Abstract

In environments with no commitment and with a need for intertemporal trade, bounded recall is shown to be a sufficient friction for a receipt system (fiat money) to lead to improved allocations in an otherwise frictionless Walrasian model. The absence of other frictions makes price determination tractable, thus the model may be used for quantitative monetary policy experiments. Some issues regarding the divisibility of money are also discussed.

Suggested Citation

  • Ted Temzelides & Jialin Yu, 2001. "On Money as a Substitute for Perfect Recall," Macroeconomics 0012020, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0012020
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    File URL: http://econwpa.repec.org/eps/mac/papers/0012/0012020.pdf
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    References listed on IDEAS

    as
    1. Kocherlakota, Narayana & Wallace, Neil, 1998. "Incomplete Record-Keeping and Optimal Payment Arrangements," Journal of Economic Theory, Elsevier, vol. 81(2), pages 272-289, August.
    2. Cole, Harold L. & Kocherlakota, Narayana R., 2005. "Finite memory and imperfect monitoring," Games and Economic Behavior, Elsevier, vol. 53(1), pages 59-72, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    money; memory; competitive equilibrium;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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