Numéraire problems and market adjustments

Sergio Parrinello

Metroeconomica, 2022, vol. 73, issue 1, 126-143

Abstract: Firstly, this paper makes a distinction between two notions of numéraire in order to clarify the problem of market equilibrium which depends on the choice of a standard of value. This problem has recently re‐emerged, although it smoldered before and during the “Two Cambridge Controversies” on capital theory in the Seventies. Secondly, it presents a collection of equilibrium/disequilibrium analysis which exhibits numéraire dependence. Thirdly, it takes a neo‐Walrasian model of non‐monetary general equilibrium as a benchmark to argue that a prominent role of numéraire should be attributed to fiat money in the analysis of market adjustment. Such a redirection of focus would avoid some typical cases of numéraire dependence that characterize a frictionless barter economy.

Date: 2022
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