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Debt enforcement and the value of money

Rojas Breu, Mariana (2017), Debt enforcement and the value of money, Journal of Economic Theory, 168, p. 237-251. 10.1016/j.jet.2016.12.010

Type
Article accepté pour publication ou publié
Date
2017
Journal name
Journal of Economic Theory
Volume
168
Publisher
Academic Press
Pages
237-251
Publication identifier
Metadata
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Author(s)
Rojas Breu, Mariana
Laboratoire d'Economie de Dauphine [LEDa]
Abstract (EN)
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.
Subjects / Keywords
Money; Inflation; Debt enforcement
JEL
E50 - General
E51 - Money Supply; Credit; Money Multipliers
E41 - Demand for Money