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Information disclosure and exchange media

David Andolfatto () and Fernando Martin

No 2012-012, Working Papers from Federal Reserve Bank of St. Louis

Abstract: When commitment is lacking, intertemporal trade is facilitated with the use of exchange media?interpreted broadly to include monetary and collateral assets. We study the properties of a model commonly used to motivate monetary exchange, extended to include a physical asset whose expected short-run return is subject to a news shock, but whose expected long-run return is stable. The nondisclosure of news enhances the asset?s property as an exchange medium, and generally improves social welfare. When a nondisclosure policy is infeasible, the framework admits a role for government debt, including fiat money. When lump-sum taxation is not permitted, fiat money may still improve welfare?but only if its circulation is supported by a cash-in-advance constraint.>

Keywords: Disclosure of information; Monetary policy - United States (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
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Citations: View citations in EconPapers (3)

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Journal Article: Information Disclosure and Exchange Media (2013) Downloads
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