Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297424 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-39
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Monetary exchange is deemed essential when better incentive-compatible outcomes can be achieved with money than without it. We study essentiality both theoretically and experimentally, using finite-horizon monetary models that are naturally suited to the lab. We also follow the mechanism design approach and study the effects of strategy recommendations, both when they are incentive-compatible and when they are not. Results show that output and welfare are significantly enhanced by fiat currency when monetary equilibrium exists. Also, recommendations help if they are incentive-compatible but not much otherwise. Sometimes money is used when it should not be and we investigate why, using surveys and measures of social preferences.
Subjects: 
Central bank research
Economic models
JEL: 
E4
E5
C92
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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