One or two monies?

Publisher:
Elsevier
Publication Type:
Journal Article
Citation:
Journal of Monetary Economics, 2010, 57 (4), pp. 439 - 450
Issue Date:
2010-01
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The set of incentive-feasible allocations is examined in a dynamic quasi-linear environment where agents lack commitment and have private information over their idiosyncratic characteristics. When record-keeping is available, the first-best allocation is implementable in a set of sufficiently patient economies. When record-keeping is limited to one money, this set is strictly smaller-except when private information is absent. When record-keeping is expanded, but limited to two monies, the set of economies for which the first-best is implementable corresponds to that of record-keeping, even when private information is present. We further demonstrate that two monies are a perfect substitute for record-keeping.
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