The Experts below are selected from a list of 324 Experts worldwide ranked by ideXlab platform

Akihiko Matsui - One of the best experts on this subject based on the ideXlab platform.

  • Fiat Money and Public Goods Provision
    2004
    Co-Authors: Akihiko Matsui
    Abstract:

    This paper studies how government uses inflation tax to finance public goods affects the circulation of a national currency in a two-country search theoretic model. Each country consists of infinitely-lived private agents and a government. A representative agent obtains utility from the private good and the public good of his own country. Each government prints Fiat Money to purchase goods, taxes on Money holdings, and provides public goods by purchasing private goods from its fellow citizens. While government purchases increase the demand for the private goods, it also induces a crowding-out effect by reducing the matching rates among private agents. Agents interact with home and foreign agents in different frequencies, reflecting the relative country size and the degree of international economic integration. We conduct some comparative statics. For example, a higher inflation tax rate makes a currency less likely to circulate locally and internationally. We then consider a policy game in which the two governments choose tax rates on their respective currencies, measuring the payoff of each government by the utility of its own representative agent. It is shown, among others, that the equilibrium tax rate of a currency is higher when it becomes an international currency than otherwise. Welfare may be improved for the issuing country of the international currency when its currency supply is not too low, for that circulation of a currency abroad may create currency shortage at home

  • A Model of Fiat Money and Barter
    Journal of Economic Theory, 1996
    Co-Authors: Fumio Hayashi, Akihiko Matsui
    Abstract:

    Abstract We present an infinite horizon model with capital in which Fiat Money and barter are two competing means of payment. Fiat Money has value because barter is limited by the extent of a double coincidence of wants. The pattern of exchange generally involves both Money and barter. We find that the Chicago rule is sufficient for Pareto efficiency, while nominal interest smoothing is necessary. For a specific utility function we provide a complete characterization of the patterns of exchange and calculate the range of inflation rates over which a stationary monetary equilibrium exists.Journal of Economic LiteratureClassification Numbers: D51, E42, E52.

  • A Model of Fiat Money and Barter
    1994
    Co-Authors: Fumio Hayashi, Akihiko Matsui
    Abstract:

    We present an infinite horizon model with capital in which Fiat Money and barter are two competing means of payment. Fiat Money has value because barter is limited by the extent of a double coincidence of wants. The pattern of exchange generally involves both Money and barter. We find that the Chicago rule is sufficient for Pareto efficiency, while nominal interest smoothing is necessary. For a specific utility function we provide a complete characterization of the patterns of exchange and calculate the range of inflation rates over which a stationary monetary equilibrium exists.

Randall Wright - One of the best experts on this subject based on the ideXlab platform.

  • a note on asymmetric and mixed strategy equilibria in the search theoretic model of Fiat Money
    1999
    Co-Authors: Randall Wright
    Abstract:

    The simple search-theoretic model of Fiat Money has three symmetric Nash equilibria: all agents accept Money with probability 1; all agents accept Money with probability 0; and all agents accept Money with probability y in (0,1). Here I construct an asymmetric pure strategy equilibrium, payoff-equivalent to the symmetric mixed strategy equilibrium, where a fraction N in (0,1) of agents always accept Money and 1-N never accept Money. Counter to what has been conjectured previously, I find N > y. I also introduce evolutionary dynamics and show that the economy converges to monetary exchange if the initial proportion of agents accepting Money exceeds N.

  • a note on purifying mixed strategy equilibria in the search theoretic model of Fiat Money
    1998
    Co-Authors: Randall Wright
    Abstract:

    The simple search-theoretic model of Fiat Money has three symmetric Nash equilibria: all agents accept Money with probability 1; all agents accept Money with probability 0; and all agents accept Money with probability y between 0 and 1. Here the author constructs a nonsymmetric pure strategy equilibrium, payoff-equivalent to the symmetric mixed strategy equilibrium, where a fraction N between 0 and 1 of agents always accepts Money and 1-N never accepts Money. Counter to what has been conjectured previously, the author finds N>y. The author also studies evolutionary dynamics and shows that the economy converges to monetary exchange if and only if the initial proportion of agents accepting Money exceeds N.

  • A Note on Sunspot Equilibria in Search Models of Fiat Money
    Journal of Economic Theory, 1994
    Co-Authors: Randall Wright
    Abstract:

    Abstract Search models can generate an endogenous role for Fiat Money, in the sense that there exist equilibria where intrisically useless, unbacked, paper currency is valued due to its function as a medium of exchange. In this note, I ask if there exist sunspot equilibria in these models, where the value or acceptability of Money fluctuates along with extrinsic random events even though the fundamentals of the economy are deterministic and time invariant. The answer is yes. Journal of Economic Literature Classification Numbers: C70, E40.

Martin Shubik - One of the best experts on this subject based on the ideXlab platform.

  • sufficiency of an outside bank and a default penalty to support the value of Fiat Money experimental evidence
    Journal of Economic Dynamics and Control, 2014
    Co-Authors: Juergen Huber, Martin Shubik, Shyam Sunder
    Abstract:

    We present a model in which an outside bank and a default penalty support the value of Fiat Money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of Money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of Fiat Money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.

  • The Value of Fiat Money with an Outside Bank: An Experimental Game
    2009
    Co-Authors: Juergen Huber, Martin Shubik, Shyam Sunder
    Abstract:

    Why people accept intrinsically worthless Fiat Money in exchange for real goods and services has been a longstanding question. There are many competing sufficient explanations that may confound each other in practice but can be individually tested in isolation experimentally. In this paper we examine a sufficient explanation of the value of Fiat Money through the existence of a debt instrument which allows consumption to be moved earlier in time. We present experimental evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory setting. The import of this finding for the theory of Money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of Fiat Money, although many other institutions such as taxation provide alternatives.

  • Multistage Models of Monetary Exchange : An Elementary Discussion of Commodity Money , Fiat Money and Credit , Part 4
    ICFAI Journal of Monetary Economics, 2009
    Co-Authors: Thomas Quint, Martin Shubik
    Abstract:

    This paper concludes the study on the modeling of Money and financial institutions, which began in Quint and Shubik (2005a and b), and Quint and Shubik (2007). This paper begins by going through some of the one-period models of trade, with and without a banking system, including a new 'sell-all' market. The main goal then is to extend these to multiperiod models. The analysis considers the conditions for the free financing of the float by Fiat Money and also derives the explicit conditions under which strategic default is optimal for the traders

  • THE VALUE OF Fiat Money WITH AN OUTSIDE BANK: AN EXPERIMENTAL GAME #
    2008
    Co-Authors: Juergen Huber, Martin Shubik, Shyam Sunder
    Abstract:

    Why people accept intrinsically worthless Fiat Money in exchange for real goods and services has been a longstanding puzzle in economics. Attempts to explain the broad acceptance of Fiat Money have relied on either assuming that someone will exchange the Fiat Money for real consumption at the end of the horizon, or on pushing the puzzle of Fiat Money into infinite future in overlapping generations settings. We examine an alternative route that can explain the value of Fiat Money through a debt instrument which allows consumption to be moved backward in time. In this paper, we present empirical evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory experiment. The invention of Fiat Money and related debt instruments allow society to replace expensive commodities by costless paper and cut the dead weight loss associated with the former.

  • the value of Fiat Money with an outside bank an experimental game
    2008
    Co-Authors: Juergen Huber, Martin Shubik, Shyam Sunder
    Abstract:

    Why people accept intrinsically worthless Fiat Money in exchange for real goods and services has been a longstanding puzzle in economics. Attempts to explain the broad acceptance of Fiat Money have relied on either assuming that someone will exchange the Fiat Money for real consumption at the end of the horizon, or on pushing the puzzle of Fiat Money into infinite future in overlapping generations settings. We examine an alternative route that can explain the value of Fiat Money through a debt instrument which allows consumption to be moved backward in time. In this paper, we present empirical evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory experiment. The invention of Fiat Money and related debt instruments allow society to replace expensive commodities by costless paper and cut the dead weight loss associated with the former.

Fumio Hayashi - One of the best experts on this subject based on the ideXlab platform.

  • A Model of Fiat Money and Barter
    Journal of Economic Theory, 1996
    Co-Authors: Fumio Hayashi, Akihiko Matsui
    Abstract:

    Abstract We present an infinite horizon model with capital in which Fiat Money and barter are two competing means of payment. Fiat Money has value because barter is limited by the extent of a double coincidence of wants. The pattern of exchange generally involves both Money and barter. We find that the Chicago rule is sufficient for Pareto efficiency, while nominal interest smoothing is necessary. For a specific utility function we provide a complete characterization of the patterns of exchange and calculate the range of inflation rates over which a stationary monetary equilibrium exists.Journal of Economic LiteratureClassification Numbers: D51, E42, E52.

  • A Model of Fiat Money and Barter
    1994
    Co-Authors: Fumio Hayashi, Akihiko Matsui
    Abstract:

    We present an infinite horizon model with capital in which Fiat Money and barter are two competing means of payment. Fiat Money has value because barter is limited by the extent of a double coincidence of wants. The pattern of exchange generally involves both Money and barter. We find that the Chicago rule is sufficient for Pareto efficiency, while nominal interest smoothing is necessary. For a specific utility function we provide a complete characterization of the patterns of exchange and calculate the range of inflation rates over which a stationary monetary equilibrium exists.

Juan Pablo Torres-martínez - One of the best experts on this subject based on the ideXlab platform.

  • Fiat Money and the value of binding portfolio constraints
    Economic Theory, 2011
    Co-Authors: Mário R. Páscoa, Myrian Petrassi, Juan Pablo Torres-martínez
    Abstract:

    We establish necessary and sufficient conditions for the individual optimality of a consumption-portfolio plan in an infinite horizon economy where agents are uniformly impatient and Fiat Money is the only asset available for intertemporal transfers of wealth. Next, we show that Fiat Money has a positive equilibrium price if and only if for some agent the zero short sale constraint is binding and has a positive shadow price (now or in the future). As there is always an agent that is long, it follows that marginal rates of intertemporal substitution never coincide across agents. That is, monetary equilibria are never full Pareto efficient. We also give a counter-example illustrating the occurrence of monetary bubbles under incomplete markets in the absence of uniform impatience.

  • Fiat Money and the value of binding portfolio constraints
    2009
    Co-Authors: Mário R. Páscoa, Myrian Petrassi, Juan Pablo Torres-martínez
    Abstract:

    It is well known that, under uniform impatience, positive net supply assets are free of bubbles for non-arbitrage kernel deflators that yield finite present values of wealth. However, this does not mean that prices cannot be above the series of deflated dividends for the deflators given by the agents' marginal rates of substitution, which also yield finite present values of wealth. In particular, binding no-short-sales constraints lead to positive prices of Fiat Money. These monetary equilibria are Pareto improvements but they are still inefficient.