This paper shows that flat money can be feasible and essential even if the trading horizon is finite and deterministic. The result hinges on two features of our model. First, individual actions can affect the future availability of productive resources. So, agents may be willing to sell for money, even if on that date they have no reason to accept it. This makes monetary trade feasible in all preceding dates. Second, agents are anonymous and direct their search for partners. So, gift-giving arrangements may be prevented because agents can misrepresent their consumption needs. This makes money essential in exploiting any gains from specialization and trade.
Camera, G., and F. Vesely (2007). Trading horizons and the value of money. European Economic Review 51(7), 1751–1767. doi: 10.1016/j.euroecorev.2006.11.005
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NOTICE: this is the author’s version of a work that was accepted for publication in European Economic Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Economic Review, volume 51, issue 7 (2007). DOI: 10.1016/j.euroecorev.2006.11.005
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