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Money and exchange in an economy with spatially differentiated agents

Petia Manolova, Charles Lai Tong and Christophe Deissenberg

Physica A: Statistical Mechanics and its Applications, 2003, vol. 324, issue 1, 445-453

Abstract: The impact of money supply on the real variables and on utility is an important question in monetary economics. Most previous works study this impact in representative agent economies, often under perfect foresight. With such a framework, however, the use of fiat money as a medium of exchange cannot be endogenously explained. This paper, by contrast, considers an economy where fiat money is intrinsically necessary for exchange, due to the local structure of interaction among agents. It investigates the transitory and permanent impact of local or global injections of money on the dynamics of exchanged quantities, prices, and individual welfares, and the mechanisms that explain this evolution.

Keywords: Economics; Spatially differentiated agents; Fiat money (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1016/S0378-4371(02)01954-4

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