A hybrid fiat-commodity monetary system

Neil Wallace ()

No 61, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: In this paper I describe a ?monetary? system in which backing is provided for the government?s liabilities by way of contingent resort to taxes. The system has some of the features of a commodity money system with a large seignorage spread between bid and ask prices. It is studied within the context of a one-good, pure exchange model of two-period-lived overlapping generations in which, aside from various uniform boundedness assumptions, considerable diversity is allowed both within and across generations. Two results are established: (i) the existence of at least one perfect foresight competitive equilibrium, and (ii) the Pareto optimality of any such equilibrium.

Date: 1980
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:61

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