Efficiency of Monetary Exchange with Divisible Fiat Money: An Experimental Approach

Kazuya Kamiya, Hajime Kobayashi, Tatsuhiro Shichijo and Takashi Shimizu
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Hajime Kobayashi: Faculty of Economics, Kansai University, Japan
Tatsuhiro Shichijo: School of Economics, Osaka Prefecture University, Japan

No DP2019-21, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: In this paper, we investigate a search model with divisible fiat money in a laboratory setting where transaction prices are endogenously determined. In the model, there exist welfare-ranked multiple stationary monetary equilibria and gift-giving equilibria. We find that endogenizing transaction prices enhanced the coordination of subjects through monetary exchange and deteriorated it through gift-giving. In other words, the subjects endogenously reduced the trade friction of monetary exchanges. We also compare our experimental results with those in search models with exogenously given transaction prices.

Keywords: Real indeterminacy; Random matching; Divisible money; Experiment; Equilibrium selection; Gift-giving (search for similar items in EconPapers)
JEL-codes: C91 C92 D51 D83 E40 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-10
New Economics Papers: this item is included in nep-dge, nep-exp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:dp2019-21

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