Premium
Asymmetric Information and Demand for Money in an Overlapping Generations Economy
Author(s) -
Wang Yong
Publication year - 1999
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/j.2325-8012.1999.tb00255.x
Subject(s) - fiat money , information asymmetry , economics , overlapping generations model , asymmetry , microeconomics , medium of exchange , exchange economy , monetary economics , monetary policy , currency , physics , quantum mechanics
This paper studies a pure exchange overlapping generations economy in which agents have asymmetric information pertaining to their income realizations. Such an information asymmetry introduces a role for fiat money that would otherwise be absent. This information asymmetry can also drastically alter the equilibrium properties of the analogous model with perfect information. In general, the more severe the information asymmetry, the greater the demand for fiat money.