Moneyspots

Extraneous Attributes and the Coexistence of Money and Interest-Bearing Nominal Bonds

Bibliographic Data

ID10177079
AuthorsRicardo Lagos (0009-0009-6755-946X, New York University, corresponding author)
Year2013
Volume121
Issue1
Pages127-185
Publication date2013-02-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueJournal of Political Economy (JOURNAL)
Journal identifiersISSN: 0022-3808 • E-ISSN: 1537-534X
PublisherUniversity of Chicago Press (PUBLISHER • US)
DOI10.1086/669681
OpenAlexW2126563939
LanguageEN
Citations received1
References cited18

It is folklore among monetary theorists that, under laissez faire, without ad hoc assumptions that favor money over bonds, there do not exist equilibria in which government-issued fiat money coexists with nominal default-free, interest-bearing government bonds with similar physical characteristics. This proposition is the basis for the strongest version of the rate-of-return-dominance puzzle. In this paper I show that if—as has been the case throughout monetary history—the physical object used as fiat money is heterogeneous in an extraneous attribute, then there exist equilibria in which money coexists with interest-bearing bonds

Bond · Dominance (genetics · Economics · Fiat money · Monetary economics · Monetary policy · Proposition · Chemistry · Economic theories and models · Economic Theory and Institutions · Economic Theory and Policy · Finance · Philosophy

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