Abstract
Fiat money is an intrinsically useless object that serves as a medium of exchange. One challenge is to construct models that depict the ancient notion that a medium of exchange is beneficial. Another is to construct models in which the medium of exchange has a low rate of return. This article reviews how those challenges have been approached and argues that progress has been achieved by taking seriously some old ideas about the circumstances in which money is helpful and about the desirable properties of money: money is helpful when there are absence-of-double-coincidence difficulties that cannot be easily overcome with credit; and a good money has desirable physical properties – recognizability, portability and divisibility.
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Wallace, N. (2018). Fiat Money. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_454
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DOI: https://doi.org/10.1057/978-1-349-95189-5_454
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