We analyze the stability of monetary regimes in a decentralized economy where fiat money is
endogenously created, information about its value is imperfect, and agents only learn from their
personal trading experiences. We show that in poorly informed economies, monetary stability
depends heavily on the government's commitment to the long run value of money, whereas in
economies where agents gather information more easily, monetary stability can be an endogenous
outcome. We generate a dynamics on the acceptability of fiat money that resembles historical
accounts of the rise and eventual colIapse of overissued paper money. Moreover, our results
provide an explanation of the fact that, despite its obvious advantages, the widespread use of
fiat money is a very recent development
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