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A Coordination Approach to the Essentiality of Money

Luis Araujo () and Bernardo Guimaraes

Review of Economic Dynamics, 2017, vol. 24, 14-24

Abstract: The essentiality of money is commonly justified on efficiency grounds, i.e., money achieves socially desirable allocations which could not be achieved by alternative technologies of exchange. In this paper we argue that what makes money achieve such allocations is its ability to overcome coordination frictions. Intuitively, the fact that money is a permanent record of past production implies that an agent is willing to produce in exchange for money even if he believes that many of his future partners will not accept money. (Copyright: Elsevier)

Keywords: Money; Credit; Beliefs; Coordination (search for similar items in EconPapers)
JEL-codes: E40 D83 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.red.2016.12.002

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