Speaker: Maurizio Iacopetta, OFCE - Sciences Po and SKEMA Business School
Title: The Emergence of Money: A Dynamic Analysis
Abstract: This paper studies the role of liquidity in triggering the emergence of money in a Kiyotaki and Wright (1989) economy. A novel method computes the Dynamic Nash Equilibria of the economy by setting up a contraction of the agents' profile of (pure) strategies and of the distribution of commodities across agents. The analysis shows scenarios in which the evolving state of liquidity sparks the acceptance of a high-cost-storage commodity as money. It also considers cases in which such a commodity loses the function of money as a result of an unfavorable evolution of liquidity. To illustrate the working of the methodology, I review notable Kiyotaki-Wright laboratory experiments with real and artificial agents. I also discuss multiple dynamic equilibria with pure strategies.
Keywords: Speculative Strategy, Dynamic Nash Equilibrium, Liquidity Differential