The transition from barter to fiat money

Joseph Ritter

No 1994-004, Working Papers from Federal Reserve Bank of St. Louis

Abstract: How did it become possible to exchange apparently valueless pieces of paper for goods? This paper provides an equilibrium account of the transition between barter and fiat money regimes. The explanation relies on the intervention of a self-interested government which must be able to promise credibly to limit the issue of money. To achieve credibility, the government must offset the benefits of seigniorage by internalizing some of the macroeconomic externalities generated by the issue of fiat money. The government's patience and the extent of its involvement in the economy are key determinants of whether the transition can be accomplished.

Keywords: Money; Money theory (search for similar items in EconPapers)
Date: 1994
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in American Economic Review, 85(1) March 1995, pp. 134-49

Downloads: (external link)
http://research.stlouisfed.org/wp/more/1994-004/ (application/pdf)
http://research.stlouisfed.org/wp/1994/94-004.pdf

Related works:
Journal Article: The Transition from Barter to Fiat Money (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:1994-004

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().