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MONEY AND LIMITED ENFORCEMENT IN MULTILATERAL EXCHANGE

Published online by Cambridge University Press:  22 November 2018

Nicola Amendola  and
Leo Ferraris
Nicola Amendola
Affiliation:
Università di Roma “Tor Vergata”
Leo Ferraris*
Affiliation:
Università di Roma “Tor Vergata”
*
Address correspondence to: Leo Ferraris, Università di Roma “Tor Vergata”, via Columbia 2, Roma, Italy; e-mail: leo.ferraris@uniroma2.it. Phone: +390672595726.
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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.

Keywords

MoneyEssentialityMultilateral Exchange
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 5 , July 2020 , pp. 1222 - 1239
Copyright
© Cambridge University Press 2018

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Footnotes

The paper was presented under the title “A quasi-Walrasian model of money” at several departmental seminars and conferences, including the 2013 Chicago Fed Summer Workshop on Money, Banking, Payments and Finance, and the IV Workshop on Institutions, Individual Behavior and Economic Outcomes, Alghero, Sardinia. We thank Randall Wright for suggesting the interpretation of limited enforcement as finite memory and seminar participants for comments. We also thank an associate editor and two anonymous referees for their comments. Leo Ferraris gratefully acknowledges financial support from the Montalcini program for young researchers of the Italian Ministry of the University.

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