Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88742
Authors: 
Camera, Gabriele
Gioffré, Alessandro
Year of Publication: 
2013
Series/Report no.: 
SAFE Working Paper Series 32
Abstract: 
Monetary theorists have advanced an intriguing notion: we exchange money to make up for a lack of enforcement, when it is difficult to monitor and sanction opportunistic behaviors. We demonstrate that, in fact, monetary equilibrium cannot generally be sustained when monitoring and punishment limitations preclude enforcement - external or not. Simply put, monetary systems cannot operate independently of institutions - formal or informal - designed to monitor behaviors and sanction undesirable ones. This fundamental result is derived by integrating monetary theory with the theory of repeated games, studying monetary equilibrium as the outcome of a matching game with private monitoring.
Subjects: 
Social norms
repeated games
cooperation
payment systems
JEL: 
E4
E5
C7
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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