On Money as a Substitute for Perfect Recall

Ted Temzelides () and Jialin Yu
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Jialin Yu: Princeton University

Macroeconomics from EconWPA

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.

Keywords: money; memory; competitive equilibrium (search for similar items in EconPapers)
JEL-codes: E C6 (search for similar items in EconPapers)
Date: 2001-02-27
Note: Type of Document - pdf; prepared on IBM PC; to print on ;
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