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Fiat Money as a Medium of Exchange

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  • Freeman, Scott J

Abstract

This paper presents a completely explicit exchange environment in which agents wishing to exchange one type of good for another choose to trade for fiat money, which is then traded for the desired goods. This exchange pattern is chosen over barter because specified properties of fiat money make this pattern less expensive than the search for a double coincidence of wants. Although the transaction services of money affect agents' utility, the model's welfare implications are those of the basic overlapping generations models, not those of models with money balances in the utility function. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Freeman, Scott J, 1989. "Fiat Money as a Medium of Exchange," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 137-151, February.
  • Handle: RePEc:ier:iecrev:v:30:y:1989:i:1:p:137-51
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    Cited by:

    1. Gabriele Camera & Charles Noussair & Steven Tucker, 2003. "Rate-of-return dominance and efficiency in an experimental economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 22(3), pages 629-660, October.
    2. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2011. "Information and Liquidity," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s2), pages 355-377, October.
    3. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    4. Williamson, Stephen & Wright, Randall, 2010. "New Monetarist Economics: Models," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 2, pages 25-96, Elsevier.
    5. Peter N. Ireland, 2005. "The Liquidity Trap, The Real Balance Effect, And The Friedman Rule ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1271-1301, November.
    6. George Selgin, 2003. "Adaptive Learning and the Transition to Fiat Money," Economic Journal, Royal Economic Society, vol. 113(484), pages 147-165, January.

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