The Two-Money Theorem

Narayana Kocherlakota

International Economic Review, 2002, vol. 43, issue 2, 333-346

Abstract: In this article, I consider environments in which all shocks have finite support and any transfer of resources is ex post voluntary. Consider an allocation that is achievable when potential trading partners know each others' histories. The one-money theorem says that the allocation is achievable using only one money if that money is divisible and money holdings are observable. The two-money theorem says that the allocation is achievable using two divisible monies, even if money holdings are concealable. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Date: 2002
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