NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Money as a Unit of Account

Matthias Doepke, Martin Schneider

NBER Working Paper No. 19537
Issued in October 2013
NBER Program(s):   EFG   IFM   ME

We develop a theory that rationalizes the use of a dominant unit of account in an economy. Agents enter into non-contingent contracts with a variety of business partners. Trade unfolds sequentially in credit chains and is subject to random matching. By using a dominant unit of account, agents can lower their exposure to relative price risk, avoid costly default, and create more total surplus. We discuss conditions under which it is optimal to adopt circulating government paper as the dominant unit of account, and the optimal choice of “currency areas” when there is variation in the intensity of trade within and across regions.

download in pdf format
   (275 K)

email paper

This paper was revised on April 4, 2017

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19537

Users who downloaded this paper also downloaded* these:
Yermack w19747 Is Bitcoin a Real Currency? An economic appraisal
Shiller w6356 Indexed Units of Account: Theory and Assessment of Historical Experience
Gorton w19540 The Development of Opacity in U.S. Banking
Mian and Sufi w15896 Household Leverage and the Recession of 2007 to 2009
Goldberg w19497 Banking Globalization, Transmission, and Monetary Policy Autonomy
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us