On Money as a Medium of Exchange

  title={On Money as a Medium of Exchange},
  author={Nobuhiro Kiyotaki and Randall Wright},
  journal={Journal of Political Economy},
  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… 
Models of the exchange process based on search theory can be used to analyze the features of objects that make them more or less likely to emerge as money in equilibrium. These models illustrate the
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This paper investigates the stability of monetary exchange equilibria and the conditions necessary for an equilibrium of this type to emerge endogenously. Previous research on money as a medium of
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More on money as a medium of exchange
SummaryWe extend the analysis of Kiyotaki and Wright, who study economies where the commodities that serve as media of exchange (or, commodity money) are determined endogenously. Kiyotaki and Wright


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Discussion *
  • C. A. Roberts
  • Psychology
    Proceedings of the ASIL Annual Meeting
  • 1987
tarian limitations. In these manuals, "military necessity" is denned and discussed, and its limitations recognized. I note that Mr. Parks has criticized the codification of the principle of