The mechanism-design approach to monetary theory

Research output: Contribution to journalArticle

29 Citations (Scopus)

Abstract

The mechanism-design approach to monetary theory is the search for fruitful settings in which money is necessary for the achievement of some desirable allocations. Fruitfulness means that the settings provide insights about puzzling observations and policy questions. Settings with three frictions are considered: imperfect monitoring, costly connections among people, and imperfect recognizability of assets. An illustrative model with those frictions is used to explain as an optimum the following features of actual economies: currency is a uniform object, currency is (usually) dominated in rate of return, some transactions are accomplished using currency and others are accomplished in other ways.

Original languageEnglish (US)
Pages (from-to)3-23
Number of pages21
JournalHandbook of Monetary Economics
Volume3
Issue numberC
DOIs
StatePublished - Dec 22 2010

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Monetary theory
Currency
Mechanism design
Friction
Rate of return
Assets
Imperfect monitoring

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

Cite this

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The mechanism-design approach to monetary theory. / Wallace, Neil.

In: Handbook of Monetary Economics, Vol. 3, No. C, 22.12.2010, p. 3-23.

Research output: Contribution to journalArticle

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