Making Money: Existence and Determination of Commodity Money in General Equilibrium


The classic Arrow-Debreu (1954) general equilibrium model cannot sustain or account for the existence of money. This lacuna arises because each household and firm faces a single budget constraint summarizing revenue and expense in all commodities. Money, a carrier of value between transactions, has no function when all credits and debits are rolled into a single expression. A trading post model of $N \geq 3$ commodities and transaction costs generates \(\frac{1}{2} N (N-1) \) separate budget constraints with distinct bid and ask prices. General equilibrium, market-clearing prices and transactions at each trading post, exists under conventional continuity and convexity conditions. Commodities acquired by an agent at one trading post and disbursed at another constitute commodity money.

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Pietro Emilio Spini
Pietro Emilio Spini
Lecturer (Assistant Professor) in Economics

Welcome to my personal page! I am a Lecturer (Assistant professor) at the University of Bristol, where I started in September 2022. I received my PhD in Economics from the University of California, San Diego. My research focus is in Econometrics and Policy Evaluation. I study how to robustify causal inference procedures against data limitations that typically arise in applied economic research.