Money Mining and Price Dynamics

We develop a random-matching model where the private production of money results from an occupation choice. While there exists a unique perfect-foresight equilibrium where the value of money reaches a steady state, there is a continuum of equilibria where the value of money inflates and bursts. In the early stage of the transition, money is not used as means of payment and its value grow at a rate equal or larger than the rate of time preference. We study divisible, indivisible, interest-bearing, and competing monies, the role of mining to con firm trades, and the implementation of the constrained-efficient allocation.