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The emergence of money: a dynamic analysis

Maurizio Iacopetta (maurizio.iacopetta@sciencespo.fr)
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Maurizio Iacopetta: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This paper studies the role of liquidity in triggering the emergence of money in a Kiyotaki-Wright economy. A novel method computes the dynamic Nash equilibria of the economy by setting up an iteration of the agents' profile of (pure) strategies and of the distribution of commodities across agents. The analysis shows that the evolving state of liquidity can spark the acceptance of a high-cost-storage commodity as money or cause the disappearance of a commodity money. It also reveals the existence of multiple dynamic equilibria with pure strategies. Several simulations clarify how history and the coordination of beliefs matter for the selection of a particular equilibrium.

Keywords: Money; Strategies; Simulations (search for similar items in EconPapers)
Date: 2019-10
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03403573
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Citations: View citations in EconPapers (2)

Published in Macroeconomic Dynamics, 2019, 23 (7), pp.2573 - 2596. ⟨10.1017/S1365100517000815⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03403573

DOI: 10.1017/S1365100517000815

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