Information Disclosure and Exchange Media

David Andolfatto () and Fernando Martin

Review of Economic Dynamics, 2013, vol. 16, issue 3, 527-539

Abstract: When commitment is lacking, intertemporal trade is facilitated with the use of exchange media--interpreted broadly to include monetary and collateral assets. We study the properties of a model commonly used to motivate monetary exchange, extended to include a physical asset whose expected short-run return is subject to a news shock, but whose expected long-run return is stable. The nondisclosure of news enhances the asset's property as an exchange medium, and generally improves social welfare. When a nondisclosure policy is infeasible, the framework admits a role for government debt, including fiat money. When lump-sum taxation is not permitted, fiat money may still improve welfare--but only if its circulation is supported by a cash-in-advance constraint. (Copyright: Elsevier)

Keywords: Money; Collateral; News; Nondisclosure (search for similar items in EconPapers)
JEL-codes: E41 E42 E44 E52 P (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (23)

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Working Paper: Information disclosure and exchange media (2012)
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DOI: 10.1010/j.red.2012.09.004

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