Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70397
Authors: 
Araujo, Luis
Camargo, Braz
Year of Publication: 
2005
Series/Report no.: 
Research Report, Department of Economics, University of Western Ontario 2005-1
Abstract: 
This paper analyzes the stability of monetary regimes in an economy where fiat money is endogenously created by the government, information about its value is imperfect, and learning is decentralized. We show that monetary stability depends crucially on the speed of information transmission in the economy. Our model generates a dynamic on the acceptability of fiat money that resembles historical accounts of the rise and eventual collapse of overissued paper money. It also provides an explanation of the fact that, despite its obvious advantages, the widespread use of fiat money is only a recent development.
Subjects: 
dynamic discrete choice models
finite mixture
nonparametric identification
panel data
sieve estimator
unobserved heterogeneity
JEL: 
C13
C14
C23
C25
Document Type: 
Working Paper

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