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Full-Text Articles in Social and Behavioral Sciences
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
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 …
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
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.
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
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.
Monetary Equilibrium With Missing Markets, Pradeep Dubey, John Geanakoplos
Monetary Equilibrium With Missing Markets, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We consider a two-period model with missing assets and missing market links, in which money plays a central role and is linked to every instrument in the economy. If there are enough missing market links relative to the ratio of outside to inside money, then monetary equilibrium (ME) exists and money has positive value. The nonexistence of GEI (of the underlying economy) shows up as a liquidity trap in terms of the ME. In sharp contrast to GEI, the ME are generally determinate not only in terms of real, but also financial, variables.
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes’ general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets …