On the coexistence of money and higher-return assets and its social role

Tai-Wei Hu and Guillaume Rocheteau

Journal of Economic Theory, 2013, vol. 148, issue 6, 2520-2560

Abstract: This paper adopts mechanism design to investigate the coexistence of fiat money and higher-return assets. We consider an economy with pairwise meetings where fiat money and risk-free capital compete as means of payment, as in [28]. The trading mechanism in pairwise meetings is chosen among all individually rational, renegotiation-proof mechanisms to maximize societyʼs welfare. We show that in any stationary monetary equilibrium capital commands a higher rate of return than fiat money.

Keywords: Money; Capital; Pairwise trades; Rate-of-return dominance (search for similar items in EconPapers)
JEL-codes: D82 D83 E40 E50 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Working Paper: On the coexistence of money and higher-return assets and its social role (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:148:y:2013:i:6:p:2520-2560

DOI: 10.1016/j.jet.2013.09.006

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