Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5100136 | Journal of Economic Theory | 2017 | 15 Pages |
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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Mariana Rojas Breu,