Does commodity money eliminate the indeterminacy of equilibria?

Ruilin Zhou ()

No WP-99-15, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Previous studies have shown that a random-matching model with divisible at money and without constraint on agents' money inventories possesses a continuum of stationary single-price equilibria. Wallace [7] conjectured that the indeterminacy can be eliminated by the use of commodity money, just as the elimination of the contin- uum of dynamic (non-stationary) equilibria in models such asoverlapping generation or infnite-horizon money-in-utility-function. In contrast, I and that in a similar random-matching model with dividend-yielding commodity money, a continuum of stationary single-price equilibria exists when the utility ofdividend is not too high. This result casts doubt on the conventional belief that the indeterminacy of monetary equilibrium is caused only by the nominal nature of money.

Keywords: Money; Commercial products (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-mon
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Journal Article: Does commodity money eliminate the indeterminacy of equilibrium? (2003)
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