Monetary mechanisms

Chao Gu and Randall Wright

Journal of Economic Theory, 2016, vol. 163, issue C, 644-657

Abstract: We provide a series of results for a standard model where exchange is facilitated by liquid assets. Compared to past work, minimal structure is imposed on the mechanism determining the terms of trade. Four simple axioms lead to a class of mechanisms encompassing common bargaining theories, competitive price taking and other solution concepts. Using only the axioms, we establish existence and (perhaps more surprisingly) uniqueness of stationary monetary equilibrium. We also show how to support desirable outcomes using creatively designed mechanisms. Special cases include pure currency economies, but we also consider extensions to incorporate real assets and credit.

Keywords: Money; Mechanisms; Bargaining; Liquidity; Credit (search for similar items in EconPapers)
JEL-codes: E42 E51 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:163:y:2016:i:c:p:644-657

DOI: 10.1016/j.jet.2016.02.011

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