The Two-Money Theorem

14 Pages Posted: 28 Jan 2003

See all articles by Narayana Kocherlakota

Narayana Kocherlakota

University of Minnesota - Twin Cities - Department of Economics

Abstract

In this article, I consider environments in which all shocks have finite support and any transfer of resources is ex post voluntary. Consider an allocation that is achievable when potential trading partners know each others' histories. The one-money theorem says that the allocation is achievable using only one money if that money is divisible and money holdings are observable. The two-money theorem says that the allocation is achievable using two divisible monies, even if money holdings are concealable.

Suggested Citation

Kocherlakota, Narayana, The Two-Money Theorem. International Economic Review, Vol. 43, pp. 333-346, 2002. Available at SSRN: https://ssrn.com/abstract=312531

Narayana Kocherlakota (Contact Author)

University of Minnesota - Twin Cities - Department of Economics ( email )

271 19th Avenue South
Minneapolis, MN 55455
United States
612-625-5318 (Phone)
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HOME PAGE: http://www.econ.umn.edu/~nkocher/

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