Location of Repository

Information learning and the stability of fiat money

By Luís Araújo


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

Topics: Monetary Stability, Endogenous Money, Decentralized Trade, Learning., Moeda - Estabilização
Publisher: Escola de Pós-Graduação em Economia da FGV
Year: 2004
OAI identifier: oai:agregador.ibict.br.RI_FGV:oai:bibliotecadigital.fgv.br:10438/12979
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.rcaap.pt/detail.jsp... (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.