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Money, Payments, and Liquidity$
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Ed Nosal and Guillaume Rocheteau

Print publication date: 2011

Print ISBN-13: 9780262016285

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016285.001.0001

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Money in Equilibrium

Money in Equilibrium

(p.61) 4 Money in Equilibrium
Money, Payments, and Liquidity

Ed Nosal

Guillaume Rocheteau

The MIT Press

This chapter presents a core framework that will help in the study of issues related to money, payments, and liquidity. It then studies money in equilibrium under trading protocols that contain either explicit axiomatic or strategic foundations, and the normative and positive implications that these protocols. The model used for the study of these trading protocols contains similar positive implications such as the value of money being dependent on the fundamentals of the economy (preferences, technologies, and search frictions). The chapter shows that fiat-money economies can have a rich set of nonstationary equilibria that reinforce the view that the value of fiat money is sustained by self-fulfilling beliefs.

Keywords:   trading protocols, value of money, fundamentals of the economy, fiat-money economies, nonstationary equilibria, fiat money

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