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A Walrasian Theory of Commodity Money: Paradoxical Results
Author(s) -
CuadrasMorató Xavier
Publication year - 2000
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00104
Subject(s) - allocative efficiency , commodity , economics , medium of exchange , order (exchange) , microeconomics , general equilibrium theory , production (economics) , neoclassical economics , monetary economics , market economy , currency , finance
This note analyses some implications of the model of commodity money described by Banerjee and Maskin ( Quarterly Journal of Economics , vol. 111, 1996, pp. 955‐1005) which may seem paradoxical. In order to do this, a general production cost structure is incorporated into the model. Two different results are highlighted. First, the existence of technologies that make counterfeiting a commodity more difficult may exclude it from being used as a medium of exchange. Second, allocative distortions due to problems of asymmetric information may become larger in the presence of such technologies.