File(s) under permanent embargo
Fiat money as a public signal, medium of exchange, and punishment
journal contribution
posted on 2020-01-01, 00:00 authored by P Gomis-Porqueras, Ching-Jen SunChing-Jen SunThis paper studies different welfare-enhancing roles that fiat money can have. To do so, we consider an indivisible monetary framework where agents are randomly and bilaterally matched, while the government has weak enforcement powers. Within this environment, we analyze state contingent monetary policies and characterize the resulting equilibria under different government record-keeping technologies. We show that a threat of injecting fiat money, conditional on private actions, can improve allocations and achieve efficiency. This type of state contingent policy is effective even when the government cannot observe any private trades and agents can only communicate with the government through cheap talk. In all these equilibria fiat money and self-enforcing credit are complements in the off equilibrium. Finally, this type of equilibria can also emerge even when the injection of fiat money is not a public signal.
History
Journal
B.E. journal of theoretical economicsVolume
20Issue
2Article number
20190098Pagination
1 - 11Publisher
De GruyterLocation
Berlin, GermanyPublisher DOI
eISSN
1935-1704Language
engPublication classification
C1 Refereed article in a scholarly journal; C Journal articleUsage metrics
Categories
No categories selectedKeywords
Licence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC