Debt enforcement and the value of money

Mariana Rojas Breu
Authors registered in the RePEc Author Service: Mariana Rojas-Breu

Journal of Economic Theory, 2017, vol. 168, issue C, 237-251

Abstract: This paper presents a framework in which fiat money has value in equilibrium even though a risk-free higher-return asset can be equally used as a medium of exchange. In a limited-commitment environment, agents may prefer to borrow a low-return asset because that results in a larger borrowing capacity. Thus, a monetary equilibrium in which money is dominated in rate of return exists.

Keywords: Money; Inflation; Debt enforcement (search for similar items in EconPapers)
JEL-codes: E41 E50 E51 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:168:y:2017:i:c:p:237-251

DOI: 10.1016/j.jet.2016.12.010

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