On the Micro-Foundation of Fiat Money’s Nominal Value under the Framework of General Equilibrium
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| Title | On the Micro-Foundation of Fiat Money’s Nominal Value under the Framework of General Equilibrium
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| Author | Xie Zhiping |
| Organization | The center for Economic Research, Shandong University |
| Email | zpxie1963@gmail.com |
| Key Words | fiat money’s nominal value; social cooperation; competitive economy |
| Abstract | This paper mainly addresses why people are rationally willing to cooperate with one another to accept fiat money from the perspective of decentralized sequential general equilibrium framework by using dynamic game to determine agents’ expectation of nominal prices in unrevealed future. The model formulates the process that agents determine fiat money’s purchasing power competitively in an infinite-time decentralized sequence economy where agents use fiat money to bridge markets to avoid the huge transaction cost. It is proved that all agents’ expectation with fiat money’s unchanged nominal value is self-fulfilling with a Nash Equilibrium so as to guarantee fiat money’s essentiality. |
| Serial Number | WP273 |
| Time | 2012-06-12 |
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