Trading Horizons and the Value of Money

21 Pages Posted: 23 Dec 2014

See all articles by Gabriele Camera

Gabriele Camera

Chapman University - Economic Science Institute; University of Bologna - Dept. of Economics

Filip Vesely

University of Wisconsin at Milwaukee - Economics

Date Written: December 22, 2014

Abstract

This paper shows that fiat money can be feasible and essential even if the trading horizon is finite and deterministic. The result hinges on two features of our model. First, individual actions can affect the future availability of productive resources. So, agents may be willing to sell for money, even if on that date they have no reason to accept it. This makes monetary trade feasible in all preceding dates. Second, agents are anonymous and direct their search for partners. So, gift-giving arrangements may be prevented because agents can misrepresent their consumption needs. This makes money essential in exploiting any gains from specialization and trade.

Keywords: monetary exchange, finite horizon, limited enforcement, specialization

JEL Classification: C70, E40

Suggested Citation

Camera, Gabriele and Vesely, Filip, Trading Horizons and the Value of Money (December 22, 2014). Available at SSRN: https://ssrn.com/abstract=2541963 or http://dx.doi.org/10.2139/ssrn.2541963

Gabriele Camera (Contact Author)

Chapman University - Economic Science Institute ( email )

Orange, CA 92866
United States

HOME PAGE: http://www1.chapman.edu/~camera/

University of Bologna - Dept. of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy

Filip Vesely

University of Wisconsin at Milwaukee - Economics ( email )

3210 N. Maryland Avenue, Bolton Hall 802
Bolton Hall 802
Milwaukee, WI 53211
United States

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