| Money and information Elektronische Daten (2002) | |||||||||||
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| Institute for Empirical Research Economics University Zurich Working Paper Series ISSN Working Paper Money and Information Aleksander Berentsen and Guillaume Rocheteau January Money and Information Aleksander Berentsen Economics Department University Basel Switzerland Guillaume Rocheteau School Economics Australian National University Australia July Abstract This paper investigates the role fiat money decentralized markets where producers have private information about the quality the goods they supply Money divisible terms trade are determined endogenously and agents can finance their consumption with money with real production When the fraction high quality producers the economy given money promotes the production highquality goods which improves the quality mix and welfare unambiguously When this fraction endogenous however find that money can valued even though decreases welfare relative the barter equilibrium The origin this inefficiency that money provides consumption insurance low quality producers which can result higher fraction low quality producers the monetary equilibrium Finally find that most often agents acquire more information the monetary equilibrium Consequently money welfare enhancing because promotes useful production and exchange but not because saves information costs Keywords Money search adverse selection moral hazard JEL would like thank Randall Wright and Kyung Cho for their very helpful suggestions This paper has also benefited from the comments Er | |||||||||||
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