Abstract
This paper presents an overlapping generations model with private information, in which the use of fiat money and the rampant moral hazard incentives sustain each other. It is shown that there is a monetary equilibrium, despite the fact that the rate of return on the nonmonetary asset is significantly higher than the rate of economic growth in the nonmonetary case; the valuation of money is not necessarily Pareto-improving, but rather can be harmful to almost all generations; an inflationary policy can improve the welfare of all generations except the initial one. Journal of Economic Literature Classification Number: E41.
Original language | English |
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Pages (from-to) | 495-515 |
Number of pages | 21 |
Journal | Review of Economic Dynamics |
Volume | 4 |
Issue number | 2 |
DOIs | |
Publication status | Published - 2001 Jan 1 |
Externally published | Yes |
Keywords
- Fiat money
- Moral hazard
- Private information
ASJC Scopus subject areas
- Economics and Econometrics