Money and capital as competing media of exchange
Ricardo Lagos and
Guillaume Rocheteau
Journal of Economic Theory, 2008, vol. 142, issue 1, 247-258
Abstract:
We construct a model where capital competes with fiat money as a medium of exchange, and establish conditions on fundamentals under which fiat money can be both valued and socially beneficial. When the socially efficient stock of capital is too low to provide the liquidity agents need, they overaccumulate productive assets to use as media of exchange. When this is the case, there exists a monetary equilibrium that dominates the nonmonetary one in terms of welfare. Under the Friedman Rule, fiat money provides just enough liquidity so that agents choose to accumulate the same capital stock a social planner would.
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (167)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022-0531(06)00123-2
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Money and capital as competing media of exchange (2006) 
Working Paper: Money and capital as competing media of exchange (2004) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:142:y:2008:i:1:p:247-258
Access Statistics for this article
Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell
More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().