Debt enforcement and the value of money

Mariana Rojas Breu (mrojasbreu@gmail.com)
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Mariana Rojas Breu: LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres
Authors registered in the RePEc Author Service: Mariana Rojas-Breu

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Abstract: This paper presents a framework in which fiat money has value in equilibrium even though a risk-free higher-return asset can be equally used as a medium of exchange. In a limited-commitment environment, agents may prefer to borrow a low-return asset because that results in a larger borrowing capacity. Thus, a monetary equilibrium in which money is dominated in rate of return exists.

Keywords: Money; Inflation; Debt enforcement (search for similar items in EconPapers)
Date: 2017
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Published in Journal of Economic Theory, 2017, 168, ⟨10.1016/j.jet.2016.12.010⟩

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Journal Article: Debt enforcement and the value of money (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01625581

DOI: 10.1016/j.jet.2016.12.010

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