On Money as a Medium of Exchange

@article{Kiyotaki1989OnMA,
  title={On Money as a Medium of Exchange},
  author={Nobuhiro Kiyotaki and Randall Wright},
  journal={Journal of Political Economy},
  year={1989},
  volume={97},
  pages={927 - 954}
}
We analyze economies in which individuals specialize in consumption and production and meet randomly over time in a way that implies that trade must be bilateral and quid pro quo. Nash equilibria in trading strategies are characterized. Certain goods emerge endogenously as media of exchange, or commodity money, depending both on their intrinsic properties and on extrinsic beliefs. There are also equilibria with genuine fiat currency circulating as the general medium of exchange. We find that… 

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