Emergence of a Good as a Medium of Exchange in Different Types of Networks

32 Pages Posted: 28 Mar 2022 Last revised: 27 Apr 2022

See all articles by Jae Hyoung Kim

Jae Hyoung Kim

Swedish House of Finance; Stockholm School of Economics

Date Written: February 18, 2022

Abstract

This study uses a novel agent-based computer model to examine how networks influence the emergence of multiple goods as media of exchange in a decentralized economy. This model implements the evolutionary process of the Kiyotaki-Wright (KW) model (1989), which explains the endogenous emergence of multiple media of exchange. I find that all the agents behave according to the KW model, where some agents prefer to accept a higher storage cost good over a lower storage cost good because they speculate having a shorter wait for trading their consumption goods. In the study, the KW model is expanded to different types of trade networks and shows that trade networks can cause agents to adopt speculative strategies. Ultimately, the results highlight the emergence of multiple goods as media of exchange is a function of networks.

Keywords: Money, Networks, Learning, Agent-Based Computational Economics, Decentralized Exchanges

JEL Classification: C63, D83, D85, E40

Suggested Citation

Kim, Jae Hyoung, Emergence of a Good as a Medium of Exchange in Different Types of Networks (February 18, 2022). Swedish House of Finance Research Paper No. 22-11, Available at SSRN: https://ssrn.com/abstract=4037872 or http://dx.doi.org/10.2139/ssrn.4037872

Jae Hyoung Kim (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

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