Working Paper
On the coexistence of money and higher-return assets and its social role
Abstract: This paper adopts mechanism design to tackle the central issue in monetary theory, namely, the coexistence of money and higher-return assets. I describe an economy with pairwise meetings, where fiat money and risk-free capital compete as means of payment. Whenever fiat money has an essential role, any constrained-efficient allocation is such that capital commands a higher rate of return than fiat money.
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers (Old Series)
Publication Date: 2011
Number: 1104