Limited Information, Money, and Competitive Equilibrium

descriptionPublicationkeyboard_double_arrow_right Article , Preprint 01 Nov 1985Publisher:Federal Reserve Bank of MinneapolisJournal:The Canadian Journal of Economics, volume 19, page 780 (issn: 0008-4085,

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Authors: Bruce D. Smith;

doi: 10.21034/wp.204 , 10.2307/135326

Limited Information, Money, and Competitive Equilibrium

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Abstract

In an overlapping generations model with borrowing and lending, uncertainty, and asymmetric information, fiat money may be essential to the existence of a competitive equilibrium. It may also serve to enhance the information of economic agents in a well-defined sense. In addition, the model presented provides suggestions about why the presence of valued fiat currency is essential to existence of equilibrium, even though in equilibrium perfect substitutes for money may exist.

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Federal Reserve Bank of Minneapolis
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