Equilibrium selection in a fundamental model of money

Bernardo Guimaraes and Luis Araujo ()

No 8200, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Fundamental models of money always exhibit autarkic equilibria where money has no value. In this paper we propose a simple procedure to select among equilibria in such models. Our procedure unveils a natural mapping between equilibrium behavior and the primitives of the economy, thus offering insights on the conditions under which money emerges as a medium of exchange. Overall, our results favour money over autarky, especially if agents are patient.

Keywords: Equilibrium selection; Money; Risk-dominance; Search (search for similar items in EconPapers)
JEL-codes: D83 E40 (search for similar items in EconPapers)
Date: 2011-01
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Citations: View citations in EconPapers (1)

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