A coordination approach to the essentiality of money
Luis Araujo (araujolu@msu.edu) and
Bernardo Guimaraes
No 381, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)
Abstract:
The essentiality of money is commonly justi ed on e¢ ciency grounds. In this paper, we propose an alternative view on the essentiality of money. We consider an economy with llimited monitoring where agents have to coordinate on the use of two alternative technologies of exchange, money and credit. We show that although credit strictly dominates money from an e¢ ciency perspective, money is essential for coordination reasons. If agents are patient, the region of parameters where they coordinate in the use of money strictly contains the region of parameters where they coordinate in the use of credit
Date: 2015-03-16
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Journal Article: A Coordination Approach to the Essentiality of Money (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:eesptd:381
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