Money and Limited Enforcement in Multilateral Exchange

Abstract

We propose a model in which money performs an essential role in the process of exchange, despite the presence of a multilateral clearing house that collects resources from and distributes them to anonymous agents. Money improves the functioning of the clearing house, simultaneously keeping the incentives to contribute and guaranteeing the fine-tuning of allocations.

Money and Credit Redux

“…As we said above, this is based on a formulation that proved useful inGu et al (2013aGu et al ( , 2013b, but there are other ways to proceed. Different versions of imperfect monitoring or record keeping in related models includeKocherlakota and Wallace (1998), where deviations are observed with a lag;Cavalcanti and Wallace (1999), where some agents are monitored while others are not;Sanches and Williamson (2010), where some meetings are monitored and other not; andAmendola and Ferraris (2013), where information gets lost over time.…”

Money and Collateral

“…All markets were assumed competitive. As shown by Rocheteau and Wright (2005) and Amendola and Ferraris (2018), the competitive assumption is compatible with the informational imperfections that characterize monetary trade. However, different market structures during the day can be considered without altering the gist of the paper.…”