Abstract
The separation of a unit of account (UoA) from a medium of exchange (MoE) in the commodity-money system is investigated by considering explicitly a seller's choice of UoA in terms of either an MoE or a unit of metal weight. If the likelihood of debasement of an MoE and its rate are high enough, the price is posted in terms of a unit of metal weight rather than an MoE. Interestingly, this MoE-UoA separated equilibrium yields the flexible nominal price, whereas an MoE-UoA integrated equilibrium yields the sticky one. This implies the nominal price rigidity in the fiat-money system where MoE and UoA are integrated.
Original language | English |
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Pages (from-to) | 1685-1703 |
Number of pages | 19 |
Journal | Journal of Money, Credit and Banking |
Volume | 45 |
Issue number | 8 |
DOIs | |
Publication status | Published - 2013 Dec |
Keywords
- Debasement
- Medium of exchange
- Nominal price rigidity
- Unit of account
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics